Grandparent child care

What is the name of your state? MD
I pay my mom bi weekly to watch my child while I work. How do we go about making sure that we are paying taxes as we should??What is the name of your state?

tiggerlily said:

What is the name of your state? MD
I pay my mom bi weekly to watch my child while I work. How do we go about making sure that we are paying taxes as we should??What is the name of your state?

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Well....if you were to do everything properly...your mother should claim the income on her tax return using schedule C, and you should take the child care credit.

tiggerlily said:

What is the name of your state? MD
I pay my mom bi weekly to watch my child while I work. How do we go about making sure that we are paying taxes as we should??What is the name of your state?

Click to expand...

One option is to pay her up to the amount it would maximize your credit and then "gift" the remaining.

In whose house is the child being watched? Yours or your mothers?

If makes a difference here, whether mom is an employee or mom is having a business.

I live with my parents in their basement apartment.

If mom is watching the kid in her part of the duplex, she's an independent contractor. You pay her fee & claim a child care credit. She files a Schedule C & pays any income/self-employment taxes on any net profit. You pay her by check (never cash) & she keeps all receipts for her expenses.

If mom watches the kid in your part of the duplex, you have to withhold employment taxes from her pay & match them as the employer. She claims any expenses on Schedule A as miscellaneous itemized deductions subject to 2% AGI.

You use Schedule H to pay the employer taxes. You also need to file a W-2.