End o' year Federal Tax question

[HomeAppraiser]

My sister-in-law has a one year old and pays his grandmother to watch him in order to work. She wants to claim the Child and Dependent Care Tax Credit on the IRS Form 2441, but I see they want the caregivers Tax ID. If she claims the credit is the IRS just going to turn around and tax her mother?

Since her mom & stepdad are in a higher tax bracket would it be a net loss to the family if she claimed the credit and they were txed? I am thinking that "tax credit" means 100% of the amount paid comes off your taxes.

Sister-in-lay is a single working mom with two kids so she also gets the EIC.

 

[DainBramaged]

Asking fourteen year-olds questions like this often gets you nowhere. Ask someone who knows what they are talking about.

 

[HomeAppraiser]

Hoping that CPA or EagleKeeper will stop by.

 

[EagleKeeper]

Originally posted by: HomeAppraiser
My sister-in-law has a one year old and pays his grandmother to watch him in order to work. She wants to claim the Child and Dependent Care Tax Credit on the IRS Form 2441, but I see they want the caregivers Tax ID. If she claims the credit is the IRS just going to turn around and tax her mother?

Since her mom & stepdad are in a higher tax bracket would it be a net loss to the family if she claimed the credit and they were txed? I am thinking that "tax credit" means 100% of the amount paid comes off your taxes.

Sister-in-lay is a single working mom with two kids so she also gets the EIC.

If she claims the credit; the grandparent is obligated to declare it under Misc income or on Schedule C.

If the grandparent claims it on Schedule C, they can write off physical expenses related to taking care of the child as a "business". This would include toys/food/transportation/room & utilities (proportional to the room sq footage/house if the room is dedicated for the child in one way or another).

 

[dquan97]

Originally posted by: EagleKeeper

Originally posted by: HomeAppraiser
My sister-in-law has a one year old and pays his grandmother to watch him in order to work. She wants to claim the Child and Dependent Care Tax Credit on the IRS Form 2441, but I see they want the caregivers Tax ID. If she claims the credit is the IRS just going to turn around and tax her mother?

Since her mom & stepdad are in a higher tax bracket would it be a net loss to the family if she claimed the credit and they were txed? I am thinking that "tax credit" means 100% of the amount paid comes off your taxes.

Sister-in-lay is a single working mom with two kids so she also gets the EIC.

If she claims the credit; the grandparent is obligated to declare it under Misc income or on Schedule C.

If the grandparent claims it on Schedule C, they can write off physical expenses related to taking care of the child as a "business". This would include toys/food/transportation/room & utilities (proportional to the room sq footage/house if the room is dedicated for the child in one way or another).

True, the grandmother would need to declare the income and would get the chance to write off any related expenses.