No. of Recommendations: 1
As for question #2...

Disclaimer: please get confirmation on all of this, I'm only speaking from what I've observed as a part-time tax preparer in a town where babysitting is a *very* common form of SE.

Most do it as SE. Nothing is withheld along the way, it's up to the sitter/nanny-type to report the income and pay the taxes (most don't pay quarterly and get stuck with it at the end of the year, but if it were me, I'd pay quarterly).

The person whose kids are getting watched can deduct the expenses to get a Child and Dependent Care Credit. That causes trouble for sitters who don't report the income. The IRS doesn't seem to care if people are related, just so long as the reported $number$ match up.

If any of the sitting/nannying is done in the home of the sitter/nanny, many expenses are deductable to offset the taxes on that income.

On piece of advice, person-to-person: if she decides to go the SE route, (which does seem to make more sense) then she may want to get herself an Employer Identification Number (EIN) so she won't have to use her SSN on all of the SE related materials.

Hope this helps,
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