Can I claim a child care provider even if it's my mom that takes care of my kids and just pay her cash monthly?

[charm384]

Does she need to pay taxes or file income tax? She get paid under $5,000 in a year.

[NancyG · Accepted solution]

If you take the deduction, then your mom would have to report the income. This is business income, normally reported on Schedule C, with deductions for expenses. Although, the amount may be low enough to avoid federal income tax, she will still be subject to FICA (social security, etc.) self-employment tax, which is about 15.3% by itself. 

Unless your tax rate is very high, you might want to just treat it as gifted between the two of you, which you can do for this size amount. If you have a lot higher income than your mom, you might want to offer to fill out her tax form or help them and maybe also pay the tax--which would maybe be lower than the amount you would have to pay yourself if you didn't deduct it.

Child care expenses are not treated like business expenses, though, so you might go through all the calculations and come back to, "I might as well just treat this as a gift and not deduct it, then they won't have to report it either."

[charm384]

I thought so. I just want to make sure I'm not missing anything. Thanks for the answer.