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Child and Dependent Care Credit & Flexible Benefit Plans

Question: I'm thinking of having a family member babysit for my two-year old child while I work. Can I claim this cost as a childcare expense even though my family member isn't a registered daycare provider? Who's responsible for paying employment taxes on the money I pay for this care?

Answer:

These payments may be qualified childcare expenses if the family member babysitting isn't 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's 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, 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're generally responsible for withholding and paying employment taxes.
  • If your family member isn't your employee, then the family member will be responsible for paying income taxes and any applicable self-employment taxes on the income earned.

Additional Information:


Category: Childcare Credit, Other Credits
Subcategory: Child and Dependent Care Credit & Flexible Benefit Plans

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The OMB number for this study is 1545-1432.
If you have any comments regarding this study, please write to:
IRS, Tax Products Coordinating Committee
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