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Since when is baby sitting a hobby?
If she loses money baby sitting for more than three out of the past five years then the IRS considers it a hobby unless she is running it in a prudent businesslike manner. Especially in this case because the brother in law is attempting to turn non-deductable expenses of childcare (lunches, milage, fees) into a deduction.

Sometimes 1099's are used for compensation...the board of director's fees are generally reported on a 1099-MISC and just picked up on the individuals 1040 under other income (and is subject to employment taxes)

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