My mother lives with me & my two kids. She has no income & does not work. I pay her for childcare so I can work & I'm claiming all 3 as dependents. Will she need a 1099?

[Marisal90]

My mother lives with me and my two daughters. She has no income & does not work. I pay her to provide childcare so, I can work and afford to work. I am claiming her and my 2 daughters as dependents. Will she still need a 1099 form? What exactly will happen if I put in the amount I pay her? Will she have to file?

[Hal_Al · Accepted solution]

Whoa! Don't do that.

You may not claim the child care credit (Dependent Care Credit - DCC) if you paid you dependent to baby sit. If you pay your mother more than $4050 for the year, and she claims it as income, she can no longer be your dependent (her income is too high).

Any money that exchanges hands does not have to be considered income by her. It can be considered a gift and gifts are not taxable.

The only way you can claim the DCC is if you do not claim her as a dependent. If you do decide to do that, she will have to report the income on her tax return. You do not issue her a 1099-Misc. Only businesses are required to issue them. Parents who babysit are exempt from social security and medicare tax (or self employment tax). So, if that is her only income, she will technically not have to file if the amount is less than $10,400. But, if she doesn't there's a small chance of hearing from the IRS, since you claiming the DCC alerts the IRS that she got that income

[Marisal90]

If I pay her $100 weekly, could I still claim her & use the DCC? is there an income limit?

[SweetieJean]

The income limit, as indicated above, is $4,050 per year fore her to be your dependent

[VolvoGirl]

You flat out can not claim the DCC for paying someone that is also listed as a dependent on your return no matter how much or little you pay them.  So you either claim your mother as a dependent and not get the DCC or not claim her.  BUT If you pay her more than $4,050 for the year you can not claim her so then you can get the DCC.

<a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/1900643-child-and-dependent-care-expense-credit">https://ttlc.intu...>

[SweetieJean]

and she must report any income that she earns that is over $400.

[Hal_Al]

The $400 (self employment) rule is not applicable. The parent can be considered as  a "Household employee" and is specifically exempt from the "nanny tax"

[Marisal90]

Does anyone know what I should do?

[Hal_Al]

It's a simple decision, choose which gets you more; DCC or claiming your mother's dependent exemption.  For most people, it's the DCC.  Since you have two kids, pay her $6000 to get the maximum benefit.

To verify which way is best, you can use this tool to do trial returns, each way. <a rel="nofollow" target="_blank" href="https://turbotax.intuit.com/tax-tools/calculators/taxcaster/">https://turbotax.intuit.com/tax-tools/...>

This assumes your mother has no other reportable income, and will not have t pay any tax on the income. Social Security is not taxable for low income people. There is a small risk that your mother may have to deal with an IRS inquiry; but it should pass scrutiny.

[Marisal90]

Thank you! You all helped me so much. I am happy there are still good people out there! I hope you all have a great weekend 🙂

[Marisal90]

Okay, as I am going through, if I pay her $6,000 and do not claim her as a dependent, do I have to then fill out a nanny form & get her an EIN?

[Hal_Al]

No. A parent is exempt from the Household employee requirements (the so called "nanny tax")*.  You don't give her anything but the $6000. If she wants to report it, she reports it as cash income.  You should pay her by check, not cash, to create a paper trail.

*There is an exception to Grandparent exemption from the Nanny Tax. You should count wages to your parent if both of the following apply: (a) your child lives with you and is either under age 18 or has a physical or mental condition that requires the personal care of an adult for at least four continuous weeks in a calendar quarter, and (b) you are divorced and have not remarried, or you are a widow or widower, or you are married to and living with a person whose physical or mental condition prevents him or her from caring for your child for at least 4 continuous weeks in a calendar quarter. It that is your situation, then Grandma will need to file a tax return and pay approximately 14% social security and medicare tax on what you pay her. You should consider that in your decision making calculations.

[Marisal90]

I just want to make the best decision. I work full time. my mother lives with me 100% I was never married. Would I be okay not counting the wages?

[Hal_Al]

"Would I be okay not counting the wages" I'm not sure what you're asking. If you count the wages for the DCC, then she must claim the wages for income tax purposes.

[Marisal90]

My question is, since I am the only working adult in my household and my mother (both my daughters grandmother) lives with me. I am not going to claim her. I will just claim my two daughters. And do the DCC for $6,000.00. The part I am a confused on is the exception to the Grandparent Exemption for the Nanny Tax. and if I should count wages to my parent. because of this :

(a) your child lives with you and is either under age 18 or has a physical or mental condition that requires the personal care of an adult for at least four continuous weeks in a calendar quarter, and (b) you are divorced and have not remarried, or you are a widow or widower, or you are married to and living with a person whose physical or mental condition prevents him or her from caring for your child for at least 4 continuous weeks in a calendar quarter.

for A- both my daughters are under 18

for B- I am not divorced. I was never married, widow or widower.

So, I would not count wages because under (B) none of that applies to me. I do not want to count the wages against my mom. I am trying to avoid any issues. I am sorry and am very thankful for your help through all of this. This is my first time actually doing my taxes on my own. I just don't want to do anything incorrectly but also, correctly and receive the highest amount back.