Javier writes:
Hello Gina!
I really enjoy your blog, not to mention the educational value it has. I was hoping you can clear somthing up for me. My wife and I pay my mother-in-law for dependent care, about $5k in 2008, and would like to know if we calim the payments we made to her towards the dependent care credit on our form 1040. We relaize that my mother-in-law will have to claim what we report as an expense as income on her on her 1040 and pay self-employment taxes and she is ok with that. Is there anything else we need to do/file regading this situation? Are we required to file a schedule H eventhough she babysits our kids at her house and not our house? Please help! And thank you in advance.
My reply:
Hello Javier, thanks for you kind words.
Yes, it does sound like you'll be eligible to claim the payments you made for your mother-in-law to care for your child(ren) on your taxes as a dependent care expense.
Since she did not care for your children in your house you are not responsible for filing Schedule H.
She will report the income received on her Form 1040, Schedule C. She can deduct any expenses she incurred in caring for your children against the income that she received. This will help to reduce the amount of taxes she will pay on this income.
Best wishes,
Gina
Yes, it does sound like you'll be eligible to claim the payments you made for your mother-in-law to care for your child(ren) on your taxes as a dependent care expense.
Since she did not care for your children in your house you are not responsible for filing Schedule H.
She will report the income received on her Form 1040, Schedule C. She can deduct any expenses she incurred in caring for your children against the income that she received. This will help to reduce the amount of taxes she will pay on this income.
Best wishes,
Gina
http://GLGcpa.com
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