If I paid my mom more than $400 to babysit my children, is she responsible for reporting babysitting income?
Yes. Your mother is responsible for reporting babysitting income in the circumstance you have described. Reporting babysitting income as wages is required if she:
- Was subject to your will as to what and how the babysitting duties were to be carried out
- Babysat in your home
If your mom is your employee, you’re required to provide her with a W-2 if you:
- Paid her more than $1,900 in the year
- Withheld taxes from her earnings
Your mom is self-employed if either of these applies:
- She’s in the business of providing childcare.
- She depends on the income.
- She puts time and effort into the activity — This shows that she intends to make it profitable.
If she’s self-employed, she should:
- Enter her babysitting income on Schedule C.
- Deduct expenses she incurred to earn her babysitting income on Schedule C.
Her babysitting earnings minus her babysitting expenses might be $400 or more. If so, she must also file Schedule SE and pay self-employment tax.
Usually, if you’re caring for a relative, you don’t have a profit motive; rather you’re doing it to help the relative. In this case, your mother wouldn’t be subject to self-employment tax. However, she would need to report the payments as taxable income on Form 1040, Line 21.
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Generally, paying gift tax is not an issue for the person receiving the gift. The giver, however, will generally only file a gift tax return when the gift exceeds the annual gift tax exclusion amount, which is $15,000 per person for 2018. The giver may also not owe gift tax due to their lifetime exemption.