who pays the taxes if you hire an "in-home" day care provider?

[yennisse]

What is the name of your state (only U.S. law)? Viginia

My Aunt is about to start babysitting my children at her home and I want to make sure I get everything done right in order to make sure that I can claim the child care costs in my taxes.

I've read that because she will watch the kids in her home that she will be considered self employeed and will therefore be resonsible for paying the taxes herself. First I just want to confirm that's true and second I want to find out if I need to provide her with any kind of tax forms (W-2's, 1099's, etc.) for her records (and my own if necessary).

Because this is my Aunt, I'm also trying to make sure that she fills out and/or submits any and all required paperwork so that she doesn't get penalized when she files her taxes. My questions for her are: (1) does she need to pay quartely taxes (or something like that) during the year based on the income she makes or does she just file her 1040 at the end of the year? and (2) will she need to submit any kind of documenation with her taxes proving how much money she made or should we just keep typical paper receipts for our records?

Thanks for the help.

 

[FlyingRon]

Sounds like she is operating her own business. She reports her income on her 1040 schedule C and SE at the end of the year. She must pay the quarterly estimated tax as well to both the state and feds. The schedule C she puts down all the money she takes in from people and then subtracts on that form her expenses to yield her income. The SE is the equivalent of the social security/medicare tax she would have paid if she were an employee.
She needs whatever records she needs to compute this.

A tax advisor would be helpful for at least setting things up the first time.

You need only save your checks or any receipts she gives you.

In addition to tax issues, depending on the number and ages of the children in her care, she may fall in need of a state license. Also she may depending on where she lives run afoul of zoning restrictions.