Grandparent Babysitting for Divorced Daughter's Child

[LIZZIEO]

In 2022, I babysat my grandchild full time (January through December) in my daughter's home, for which she paid me just under $6000. I did not work elsewhere.  I am not interested in earning social security benefits for this. My husband is retired and receives social security. We file our taxes jointly.

My daughter and her ex-husband divorced mid-year (August 2022). She has full custody and receives monthly child support from her ex-husband. (One factor determining the amount of child support that she receives is based on the fact that she does pay for childcare.)

Given our situation, I have several questions based on 2 different scenarios:

Scenario #1:

If my daughter does not claim the Child and Dependant Care Credit, can I consider what she pays me as a "gift" and, therefore, not have to declare it as income on my taxes? OR

Scenario #2:

If my daugter does claim the Child and Dependant Care Credit,

a) how does my daughter classify me as caregiver when filing her taxes and what form(s) if any does she need to supply me with? AND

b) how do I classify myself (ie "self-employed" or "household employee") and declare the income when filing my and my husband's taxes on Turbotax?

Lastly, will the Deluxe Federal and State version of Turbotax be sufficient given our situation, or do you recommend another?

[Carl]

If my daughter does not claim the Child and Dependant Care Credit, can I consider what she pays me as a "gift" and, therefore, not have to declare it as income on my taxes?

Yes. But I can't be certain how that may affect things on the legal front aside from taxes.

If my daugter does claim the Child and Dependant Care Credit,

a) how does my daughter classify me as caregiver when filing her taxes and what form(s) if any does she need to supply me with?

She doesn't need to provide "you" any forms. You are the one who needs to supply her with a statement of how much she paid you for the year, along with your legal name and Taxpayer Identification Number (your SSN). Your daughter is required to report who she paid, and how much she paid, in order to get the credit.

b) how do I classify myself (ie "self-employed" or "household employee") and declare the income when filing my and my husband's taxes on Turbotax?

It depends. You could be a household employee or self-employed. It just depends on the facts and circumstances. I suggest you start reading at https://turbotax.intuit.com/tax-tips/self-employment-taxes/tax-tips-for-nannies-and-at-home-care-giv...

Lastly, will the Deluxe Federal and State version of Turbotax be sufficient given our situation, or do you recommend another?

Deluxe should be fine.

[LIZZIEO]

Carl, thank you for your answer and information. I agree that the "gift" scenario (#1) I mentioned may cause other "issues" and was just exploring it based on other things I read, but don't feel comfortable pursuing.

Thank you for the link. It did somewhat help to clarify some of the info in the IRS Publication 926, but I'm still not sure how to classify myself (ie self employed or household employee) and  I'll keep searching for more info.

[Hal_Al]

I don't think you're going to get a clear cut answer*. Working in your daughter's home technically makes you a household employee. Grandparent baby sitters are generally exempt from social security and Medicare tax, but your daughter's divorced status means that doesn't apply to you**.   The easy thing to do is report it as self employment income and pay both the employee and employer share of social security and Medicare tax as "Self employment tax".

*Here's long thread exploring all the options. https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/do-i-have-to-claim-in...

**Wages not counted. Don't count wages you pay to
any of the following individuals as social security or Medicare wages, even if these wages are $2,600 or more during the year.
1. Your spouse.
2. Your child who is under the age of 21.
3. Your parent. Exception: Count these wages if both
the following conditions apply.
a. Your parent cares for your child (including an
adopted child or stepchild) who is either of the following.
i. Under the age of 18.
ii. 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.
b. Your marital status is one of the following.
i. You’re divorced and haven't remarried.
ii. You’re a widow or widower.
iii. You’re living with a spouse whose physical or
mental condition prevents them from caring for

your child for at least 4 continuous weeks in
the calendar quarter services were performed.
4. An employee who is under the age of 18 at any time
during the year. Exception: Count these wages if
providing household services is the employee's principal occupation. If the employee is a student, providing household services isn't considered to be their
principal occupation

Reference: https://www.irs.gov/pub/irs-pdf/p926.pdf (page6)

[LIZZIEO]

Thanks so much for all of the information and links. I appreciate your help!