I took advantage of a dependent care FSA ($5,000) and paid my mother for her services as my nanny. How does my mom report this on her taxes? Will this be taxable income?

[jjacas89]

My mo is retired now - I am unsure how to report the $5,000 she received. Will she have to report income as an independent contractor?  

[TomK · Accepted solution]

Yes.  

You will report her income as self-employed income on a Schedule C.

To report self-employed income without a 1099-MISC:

1. Open your return in TurboTax.
2. Click on “Take me to my return” if applicable.
3. Search for "self employed income" in Search box.
4. Click on "Jump to self employed income" link.
5. Answer/follow the screen interview prompts.

You can claim child care expenses paid to your mother if she is not your dependent.

You must identify the provider (your mother) on your tax return by providing her name and SSN), and she will have to report this income on her tax return.

Please read this TurboTax FAQ for additional information on "What is the Child and Dependent Care Credit?": What is the Child and Dependent Care Credit?