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My wife will be babysitting our neighbor's baby beginning next week. Our neighbor will be using my wife's ssn in order to get whatever daycare credits she's entitled to.

What do my wife and I need to do differently in terms of tax preparation. I've run across references to Schedule C, Schedule SE, etc., but was hoping someone here may have dealt with a similar issue in the past.

It all depends on where the sitting is happening. If it's in the neighbor's house, your wife is the neighbor's employee, and the paperwork falls on the neighbor. If it's in your house, your wife is self-employed and will need Schedules C and SE. Self-employment also opens some retirement savings options for her. I suggest some basic reading in IRS Publications 334, 560, and 587.

We will again be using Turbo Tax to prepare our taxes. Will all of this be sorted out with the questions that Turbo Tax will ask of us?

The TT 1040 edition will handle everything for you. If you don't wind up with a Schedule C and SE (assuming self-employment), come holler at us and we can point you in the right direction.

Also, does anyone know (or know where I should search) if any sort of license in necessary in California? There's just one baby.

I'm glad to see that you anticipated my advice to check on state and local licensing requirements, etc. Even more so since you're in California, which can make the Federal government look flexible. I'd start with your city/county business licensing offices. Also, I'd check for some sort of childrens' welfare state agency in the "blue" pages of the phone book.

Phil Marti
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