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drawdef
New Member

I'm retired and on SS. I took care of my grandchild last year and the parents are claiming child care deduction. Where do I report the income on my taxes?

 
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13 Replies
Hal_Al
Level 15

I'm retired and on SS. I took care of my grandchild last year and the parents are claiming child care deduction. Where do I report the income on my taxes?

Report the amount they are claiming, for the child care deduction,  as self employment income*. 

You will need to up grade to TurboTax Self  Employment**

*This assumes you baby sat in your home, not theirs.

**There is a work around in TT Deluxe. Enter the income at the 1099-Misc screen, even though you didn't get a 1099. When asked why you got the 1099-Misc, select “Freelancer". TurboTax will prepare schedule C-EZ, instead of schedule C

 

drawdef
New Member

I'm retired and on SS. I took care of my grandchild last year and the parents are claiming child care deduction. Where do I report the income on my taxes?

What would the difference be if I sat in their home, or a combination of both locations?
Hal_Al
Level 15

I'm retired and on SS. I took care of my grandchild last year and the parents are claiming child care deduction. Where do I report the income on my taxes?

You could be classified as a "household employee", not subject self employment (social security & medicare) tax (SET)*.
A mixture of both places would make you still self employed.

*A grandparent is exempt from SET. For anybody else, the amount paid would have to be less than $1900.
drawdef
New Member

I'm retired and on SS. I took care of my grandchild last year and the parents are claiming child care deduction. Where do I report the income on my taxes?

I made more than $1900 and it was all done at my sons home.  Does any of this bear if they can take the credit?  I'm still confused as to where I report this income, lol.
Hal_Al
Level 15

I'm retired and on SS. I took care of my grandchild last year and the parents are claiming child care deduction. Where do I report the income on my taxes?

Sorry for the confusion. It can be complicated. They are definitely allowed to take the day care credit, regardless of which way you report the income.  The only confusion is over how you report the income.
Because you are the taxpayer's parent, they are not subject to the "Nanny tax". Since you baby sat in their home, you may be able to avoid paying social security tax.
In TurboTax, enter at:
 Federal Taxes
Click on Wages and Income
Scroll down to Less Common Income
On Miscellaneous Income, 1099-A, 1099-C click the start button
On the next screen click the start button on Other Income not already reported on Form W-2 or Form 1099
Answer Yes on the next screen and enter the amount under Household Employee Wages. Enter the full amount they are claiming even though the screen says enter only if less than $1900 (being the taxpayer's parent waives the $1900 limit).

TurboTax will put the income on line 7 (line 1 tax years 2018 and later) of form 1040 with the notation "HSH". This income is earned income and would qualify for the Earned Income Credit (if you're under 65) and for making an IRA contribution.

You MIGHT not be required to report this as income at all, because it is only a transfer of money between family members, and could be considered a gift, under the right circumstances.  But, in order for them to claim the day care credit, you must report it as income.
There is an exception to a grandparent being exempt form the nanny tax:  you (the child's parent) "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."

I'm retired and on SS. I took care of my grandchild last year and the parents are claiming child care deduction. Where do I report the income on my taxes?

I had a question on this. If 12,000 is paid to a grandparent of a child in a tax year, can this be claimed for the child care deduction? If so, would the grandparent still need to do the 1099-misc to claim the income and get the HSH notation on the 1040 form? With such a high amount, is it necessary to withhold taxes, or as a grandparent, are they exempt from SET?

Hal_Al
Level 15

I'm retired and on SS. I took care of my grandchild last year and the parents are claiming child care deduction. Where do I report the income on my taxes?

Q. If 12,000 is paid to a grandparent of a child in a tax year, can this be claimed for the child care credit?

A. Yes. All that's needed is for the parent to provide the baby sitter's SS# on the IRS form 2441.

 

Q.  If so, would the grandparent still need to do the 1099-misc to claim the income?

A.  No.  The grandparent  does not need any form from the parent.  The grandparent reports the income based on their own records.

 

Q. Does grandparent need a form, from parent, to get the HSH notation on the 1040 form?

A.  No.  There is no form to input to make that happen.  The grandparent just need to know how to enter in TT (described above).

 

Q. With such a high amount, is it necessary to withhold taxes?

A. There's no need to make the parent do withholding. Grandparent can make quarterly estimated payments if needed.

 

Q. As a grandparent, are they exempt from SET.

A. Only if the grandparent babysits in the parent's home, as discussed above. 

DianeW777
Employee Tax Expert

I'm retired and on SS. I took care of my grandchild last year and the parents are claiming child care deduction. Where do I report the income on my taxes?

Yes, it can be used to claim the child and dependent care credit as long as your parent (grandparent of the child) claims the income.

 

No, they do not need any tax form. A parent is an exception to the household employee tax requirement (so called "nanny tax"). But the income IS taxable to your parent(s), particularly if you plan to claim the child and dependent care credit.  You must use their SSNs and address. If it was done in your home, then they should follow the procedures provided by @Hal_Al in this thread.

 

Wages not counted for social security and Medicare wages.  (IRS Publication 926)

Don't count wages you pay to any of the following individuals as social security or Medicare wages, even if these wages are $2,400 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 him or her 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 his or her principal occupation.

Child and dependent care expenses have changed for 2021. You are now able to get a credit for up to 50% of eligible expenses. The amount of eligible expenses has increased from $3,000 for one qualifying person to $8,000. Additionally, for those with two or more qualifying persons, the amount of eligible expenses has increased from $6,000 to $16,000.

@mbarrera345

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I'm retired and on SS. I took care of my grandchild last year and the parents are claiming child care deduction. Where do I report the income on my taxes?

Thank you for your response to my question. We will be claiming the dependent care credit. In TT, do we check the box where it asks "check here if the provider is your household employee" She mostly cares for our child in our home, my mother does not live with us. She does claim the wages as this is her only income and I helped her use the process you had listed in the forum to get the wages on line 1 to list as "HSH 12000" We have never claimed the dependent care credit and have paid 12,000 in child care every year since 2018. Is it too late to file for amendments?

Hal_Al
Level 15

I'm retired and on SS. I took care of my grandchild last year and the parents are claiming child care deduction. Where do I report the income on my taxes?

Q. Do we check the box where it asks "check here if the provider is your household employee".

A.  No.  That will tell TurboTax to prepare Schedule H and  pay the "nanny tax".  Let the the grandparent handle her own taxes.

 

Q.  Is it too late to file for amendments?

A.  No. you have 3 years to amend.  For 2018, you would have to amend by April 15, 2022. 

 

 

I'm retired and on SS. I took care of my grandchild last year and the parents are claiming child care deduction. Where do I report the income on my taxes?

@Hal_Al 

Follow up question from my mom:

 

If my daughter pays me 12,000 for caring for my grandchildren in my own home, how do I report this as income, is it taxable income, and can she still claim the childcare tax credit?

 

She showed me how to report it with the "HSH " notation but I'm not caring for them in her home. Does this matter? 

I'm retired and on SS. I took care of my grandchild last year and the parents are claiming child care deduction. Where do I report the income on my taxes?


@mbarrera345 wrote:

@Hal_Al 

Follow up question from my mom:

 

If my daughter pays me 12,000 for caring for my grandchildren in my own home, how do I report this as income, is it taxable income, and can she still claim the childcare tax credit?

 

She showed me how to report it with the "HSH " notation but I'm not caring for them in her home. Does this matter? 


Let's go back, there are two different situations being discussed here, and this conversation is spread out among several different people over many years.

 

1. If Amy provides care in Betty's home for Betty's children, Amy is Betty's household employee.  Betty is generally required to file schedule H, withhold and pay social security and medicare tax (household employee tax), and give Amy a W-2

1A. There is an exception to this rule if Amy is Betty's parent.  Most of the time, if the caregiver is the parent of the taxpayer (the children's grandparent), then household employee tax is not required to be withheld and Betty does not give Amy a W-2.  Amy is supposed to voluntarily report the income as household employee wages.  This is no longer added to form 1040 line 1 with "HSH", there is a special line just for this purpose on the new form 1040, line 1b.  

1B. And (of course) there is an exception to the exception, where sometimes Betty must withhold household employee taxes even if the caregiver is their own parent, but that does not apply here.

 

2. However, if Amy provides care for Betty's children in Amy's own home, then Amy is considered self-employed and will file a schedule C.  This is treated like any other home business or self-employment, and there are no exceptions for grandparents caring for grandchildren.  Amy is a self-employed caregiver whether she is caring for relatives or strangers, it doesn't matter.  Amy reports her gross income on schedule C.  She may be allowed to deduct certain household expenses as "business use of your home", otherwise known as the home office deduction.  See the links below.  Net income or profit after subtracting expenses is subject to self-employment tax, and maybe income tax, depending on the amount of profit and the care giver's other taxable income.  

 

Separate from all this is the fact that families help each other all the time, and there is no squad of IRS agents going around looking to audit grandmas who babysit their grandkids from time to time.  But if the taxpayer wants to pay grandma and claim a tax credit for the expense, the IRS is going to be looking to see if grandma has matching income.  If you're going to treat it like a business, you have to go all-in, you can't do it half way. 

 

And very lastly, if you decided that you did want to report this as household employee wages (even though that is technically incorrect), the instructions have changed, since household employee wages now go someplace different on form 1040.  In turbotax, go to "Miscellaneous Income, 1099-A, 1099-C"; then "Other income not already reported on a Form W-2 or Form 1099"; then "Did you receive other wages" (answer Yes); then "Wages Earned as a Household Employee."  Enter the amount.  Click "Continue", then keep hitting Continue to skip past the other types of income that don't apply to you.  

 

My guess is that, if you report this as household employee wages, the IRS will probably be satisfied.  However, it is probably not technically correct since, if you provide care in your own home, you are usually considered self-employed.  

 

 

 

https://www.irs.gov/taxtopics/tc509

https://www.irs.gov/pub/irs-pdf/p587.pdf

https://turbotax.intuit.com/tax-tips/small-business-taxes/the-home-office-deduction/L1RZyYxzv

 

I'm retired and on SS. I took care of my grandchild last year and the parents are claiming child care deduction. Where do I report the income on my taxes?

Thank you so much for the breakdown! This was very helpful.

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