Child and Dependent Care Credit & Flexible Benefit Plans
Question: I am thinking of having a family member babysit for my two-year old child while I work. Who is responsible for paying taxes on the money I pay for this care? Can I claim this cost as a childcare expense even though my family member is not a registered day care provider?
These payments may be qualified childcare expenses if the family member babysitting is not your spouse, the parent of the child, your dependent, or your child under age 19, and if you otherwise qualify to claim the child and dependent care credit.
Who is responsible for taxes on these payments depends on whether your family member is your employee or is self-employed (an independent contractor).
- See Publication 15-A (.pdf), Employer's Supplemental Tax Guide, for a general discussion of how to determine whether an individual who is performing services for you is an employee or an independent contractor.
- Special rules apply to family employees generally, and to family employees who perform household work (including babysitting) in your home. For more information on these rules, see Publication 15, (Circular E), Employer's Tax Guide, and Publication 926, Household Employer's Tax Guide.
- If your family member is your employee and no exceptions apply, then you are generally responsible for withholding and paying taxes.
- If your family member is not your employee, then the family member will be responsible for paying income taxes and any applicable self-employment taxes on the income earned.
- Publication 503, Child and Dependent Care Expenses
- Form 2441 (.pdf), Child and Dependent Care Expenses
- Tax Topic 602, Child and Dependent Care Credit
Category: Child Care Credit, Other Credits
Subcategory: Child and Dependent Care Credit & Flexible Benefit Plans