Q. If My mom takes care of my daughter in my house and she reports it as 1099 Misc* can I still claim the Dependent Care Credit.
A. Yes. You can claim the dependent care credit no matter how she reports the income, or if she doesn't report it. You have to provide her SS# to the IRS. Reporting the income is her issue, not yours.
Q. Also am I suppose to give her a 1099 Misc form?
A. No. She reports the income from her own records (you have the option of giving her a W-2, but "nobody" does).
Q. In total her gross income is $9,700 Does she have to report the $2,200?
A. Yes. She doesn't need to fila a tax return, since her total income is less than $12,400. But if she files to get a refund of withholding on her W-2, she must also include the $2200, even though it doesn't change anything.
Q. If she doesn't have to report this income can I still claim the DCC?
A. Yes.
* I'm not sure what you mean by "reports it as 1099 Misc". She should not report this as self employment, unless she trying to build up Social security credits. Self employment income requires her to pay both social security and Medicare (FICA) tax at a ~14% rate. She should not report this as "other income" as it will not be treated as earned income. As a grandparent, working in your home, she is exempt from FICA. She reports it as Household Employee income.
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. On the net screen, enter your income as Household Employee Wages (ignore the $2100 limit, it doesn’t apply to grandparents) and continue the interview until it completes.
TurboTax puts the amount on line 1 (wages) of form 1040 with the notation “HSH”. It is considered earned income.
