topic I will be paying my mother $700 a month for childcare in her home, does she need to report this income and is it subject to tax? She would not exceed 40 hours a week. in Deductions & credits

I will be paying my mother $700 a month for childcare in her home, does she need to report this income and is it subject to tax? She would not exceed 40 hours a week.

JJMidwest2 — Tue, 04 Jun 2019 18:39:03 GMT

Does she have other income? Or file a Joint return with...

VolvoGirl — Tue, 04 Jun 2019 18:39:04 GMT

Does she have other income? Or file a Joint return with a husband? She probably needs to file it on her tax return and pay self employment tax on it. If you want to get the Child Care Credit for it you need her ssn and she needs to report it as income.

I agree that she must claim this and pay taxes on it.

SweetieJean — Tue, 04 Jun 2019 18:39:06 GMT

I agree that she must claim this and pay taxes on it.

She does not have another source of income. She does not...

JJMidwest2 — Tue, 04 Jun 2019 18:39:07 GMT

She does not have another source of income. She does not feel she should need to report it because she doesn't want to pay taxes on it.

Unfortunately, she doesn't have a choice. IRS Pub 501 say...

jerry2000 — Tue, 04 Jun 2019 18:39:08 GMT

Unfortunately, she doesn't have a choice. IRS Pub 501 says that you must file if you have net self-employment income of more than $400. You must file and pay self-employment tax even if no ordinary income tax is owed. See Table 3, page 5, IRS Pub 501 at this link:
You can find IRS Pub 501 at this link:
<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/p501.pdf">https://www.irs.gov/pub/irs-pdf/p501.pdf</a>
When you claim the credit for it, you must list her SSN and the IRS will check to see that she files and reports the income.

Sorry the self employment tax on 8,400 is about $1,200.

VolvoGirl — Tue, 04 Jun 2019 18:39:10 GMT

Sorry the self employment tax on 8,400 is about $1,200.

"she doesn't want to pay taxes on it." The tax law does...

SweetieJean — Tue, 04 Jun 2019 18:39:11 GMT

"she doesn't want to pay taxes on it." The tax law does not give that choice. How does she support herself with no income?
I suppose you could gift her the money, but then you cannot claim the Child Care Credit on your own return.

If she is receiving any govt benefits (food stamps, housi...

SweetieJean — Tue, 04 Jun 2019 18:39:13 GMT

If she is receiving any govt benefits (food stamps, housing, etc.), the fact that you provide her with $7,000 could impact those in any case.

Your only choice it to call it a gift and don't take the...

Critter — Tue, 04 Jun 2019 18:39:14 GMT

Your only choice it to call it a gift and don't take the child care credit if she doesn't want to call it income.

She files jointly with my dad, she does not work.

JJMidwest2 — Tue, 04 Jun 2019 18:39:15 GMT

She files jointly with my dad, she does not work.

Grandma must report the income, but in my opinion she is...

TomD8 — Tue, 04 Jun 2019 18:39:17 GMT

Grandma must report the income, but in my opinion she is not required to pay SE tax, assuming she takes care only of her own grandkids, in her own home. That's because she's not in the trade or business of providing day care in her home. Grandma should report the income on line 21 of her Form 1040. She does not need to do a Schedule C or SE. My opinion is based on the examples in this IRS reference: https://www.irs.gov/businesses/small-businesses-self-employed/family-caregivers-and-self-employment-...

That link refers to "in-home services" Grandma is doing...

SweetieJean — Tue, 04 Jun 2019 18:39:18 GMT

That link refers to "in-home services" Grandma is doing the work in her own home.

OK, another argument: babysitting income paid to a grand...

TomD8 — Tue, 04 Jun 2019 18:39:19 GMT

OK, another argument: babysitting income paid to a grandparent is not subject to Social Security and Medicare taxes unless both the following conditions apply:
Condition 1:
Your ("you" being the taxpayer) parent cares for your child who is either of the following:
1. Under the age of 18.
2.Has a physical or mental condition that requires the personal care of an adult for at least 4 continuous weeks in the calendar quarter services were performed.

AND

Condition 2.
Your marital status is one of the following.
1.You’re divorced and haven't remarried.
2.You’re a widow or widower.
3.You’re living with a spouse whose physical or mental condition prevents him or her from caring for your child for at least 4 continuous weeks in the calendar quarter services were performed.
<a rel="nofollow" target="_blank" href="https://www.irs.gov/publications/p926/ar02.html#en_US_2017_publink100086735">https://www.irs.gov/publications/p926/ar02.html#en_US_2017_publink100086735</a>

I still say call it a gift.

Critter — Tue, 04 Jun 2019 18:39:21 GMT

I still say call it a gift.

I agree with Tom's first line of thought (the second thou...

TaxGuyBill — Tue, 04 Jun 2019 18:39:22 GMT

I agree with Tom's first line of thought (the second thought only applies to Household Employees, so that does not apply).

However, if Grandpa has enough income that they need to file a tax return anyways, reporting it on Line 21 as "other income" will probably cost MORE in taxes. That is because a daycare provider who has a business can deduct A LOT of things, resulting in a low profit (or often a loss). The Income taxes on the FULL cost of "other income" would likely be more than the combined total of the Income taxes and SE taxes for the PROFIT of the "business".

We still don't know if OP plans to take the Child Care Cr...

SweetieJean — Tue, 04 Jun 2019 18:39:24 GMT

We still don't know if OP plans to take the Child Care Credit. If not, then I say it's a gift.

A Gift is a no-strings-attached payment. The OP said she...

TaxGuyBill — Tue, 04 Jun 2019 18:39:25 GMT

A Gift is a no-strings-attached payment. The OP said she is paying "for childcare". In other words, the grandmother would be willing to do this for free AND the mother would be giving this money to the grandmother even if the grandmother was not watching the child. This is not a Gift.

I agree that technically Bill is correct ... however ......

Critter — Tue, 04 Jun 2019 18:39:26 GMT

I agree that technically Bill is correct ... however ... if the daughter doesn't turn the mother in by claiming the Child Care Credit then how is the IRS to ever know. And now that we have educated her she now knows that she is giving her mom a gift &/or reimbursing her for the costs (diapers, food, transportation, entertainment, etc) for the child. Treating it as a gift/ cost covering arrangement between family members is common and impossible for the IRS to patrol even if they had a mind to do so.

I will never encourage something that is not correct just...

TaxGuyBill — Tue, 04 Jun 2019 18:39:28 GMT

I will never encourage something that is not correct just because the IRS wouldn't know about it.

Re: I will be paying my mother $700 a month for childcare in her home, does she need to report this income and is it subject to tax? She would not exceed 40 hours a week.

sanchez86 — Sat, 20 Jul 2019 04:55:39 GMT

What attaches the payment to childcare?

I happen to pay a ton of my parents' bills (car, insurance, cable, electricity, etc) because they don't make much $. They also happen to occassionally babysit my child because they are his grandparents.

What if OP paid his parents' bills (rent, phone, car, etc), and separately, the grandparent takes care of the baby because they're the grandparent and grandparents want to spent time with their grandchild.

(Obviously OP wouldn't be able to claim the Child Tax Credit, but least it wouldn't be reportable income to the grandparent, right?).