Your wife would be an independent contractor providing child care or an employee depending on the situation of who controlled the schedule.
Considering the amount of money was under $2,000 , it really doesn't matter if she was an employee or independent contractor. She did not pay her enough to worry about sending a W-2. See below from the IRS:
If the babysitter is your employee, you must provide a Form W-2 if one of these is true:
- You paid the employee at least $2,000 in 2017.
- You paid the employee wages of any amount, and you withheld federal tax.
If you meet one of those rules, you must issue a W2 regardless of the age of the babysitter.
Complete a Form W2 and give copies B, C, and 2 to the employee by Jan. 31, 2018. To file these forms, you’ll need a tax ID. Send the W-2, copy A with the W-3 to the Social Security Administration by the last day of February — or the last day of March if you e-file the W-2.
Because your daughter did not hire your wife in the course of business, your daughter cannot issue 1099.
A 1099
is done when a person in their trade or business pays more than $600 to an independent contractor.
Considering the payment does not fall into either a W2 or 1099, your wife would simply enter the income under "other income" and indicate she did not get a tax form.
Your daughter will list the payment for child care to get the credit, but she will need your wife's social security number since there is no EIN.
