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JJMidwest2
New Member

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.

 
21 Replies
VolvoGirl
Level 15

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.

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.
SweetieJean
Level 15

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.

I agree that she must claim this and pay taxes on it.
JJMidwest2
New Member

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.

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.
jerry2000
Alumni

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.

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.
VolvoGirl
Level 15

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.

Sorry the self employment tax on 8,400 is about $1,200.
SweetieJean
Level 15

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.

"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.
SweetieJean
Level 15

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.

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.
Critter
Level 15

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.

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.
JJMidwest2
New Member

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.

She files jointly with my dad, she does not work.
TomD8
Level 15

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.

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-...

**Answers are correct to the best of my ability but do not constitute tax or legal advice.
SweetieJean
Level 15

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.

That link refers to "in-home services"  Grandma is doing the work in her own home.
TomD8
Level 15

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.

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/pub...>
**Answers are correct to the best of my ability but do not constitute tax or legal advice.
Critter
Level 15

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.

I still say call it a gift.
TaxGuyBill
Level 9

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.

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".
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