You can’t pay your sitter’s taxes, except by giving them a raise which is reported as taxable income and which they could use to pay their tax.
If the care is provided in your home, the person is your household employee. You are required to pay household employee taxes on your tax return – this is the equivalent of Social Security and Medicare tax withholding for a business employee. You are also required to give the household employee a W-2. There may be a procedure that you can use to issue a W-2 if the employee does not have a TIN, but I don’t know what it is.
If you paid for care in the person‘s home, then they are acting as an independent contractor and are responsible for their own income taxes. You do not issue a 1099, they are responsible for keeping accurate business records of their income and expenses. They are required to file a tax return if their self-employment income is more than $400, and when they file their tax return they will apply for a TIN. They will owe 15% self-employment tax and may owe between zero and 22% income tax, depending on their other taxable income. If you want to give them a raise in order to compensate them for their taxes, that’s fine, and it is up to them to report all that income as taxable income to them.
Separately, you can’t claim the child and dependent tax credit on your return unless you provide the taxpayer identification number of the care provider. If they don’t have a TIN, you can attempt to claim the credit in the following way:
Write “refused” in the box for the care provider‘s taxpayer number. In TurboTax online, you may need to use a fake identification number to get past the interview, try 999-88–9999. Print your return, you can’t e-file in this situation. Use white out to cover the fake identification number and write “refused“. Attach a written statement giving the care provider’s name, address, and any other pertinent information. You must describe your diligent efforts to obtain their taxpayer number, including the fact that you gave them a form W-10 and they refused to provide you the identification number as required. Mail your tax return and the statement of explanation to the IRS. The IRS will review the case and may award you the credit. The IRS will also be on the lookout for a tax return from the care provider that declares their taxable income.
If your care provider is an independent contractor working from their own home and they plan to file a tax return, you could wait until after they file their return (and their ITIN application) and receive their taxpayer identification number in the mail. Then, use their taxpayer identification number to claim the child and dependent care credit on your tax return in the normal way.
The child care credit is 50% of eligible expenses for most taxpayers for 2021, significantly increased due to emergency Covid legislation, so it will be greatly to your advantage to sort this out one way or the other.
