My 65-year old mother lives with us in Florida, and she takes care of our two young children while my husband and I are at work. My husband and I pay my mother about $6,000 a year in cash, and we use my mother's SSN as our Child Care Provider on Tax Form 2441 (Child & Dependent Care Expenses). Consequently, my mother files her own taxes as a "Self-Employed Caregiver", and she declares the $6,000-income she receives from us. And, she pays her own taxes yearly. Are we doing it correctly? Or, should we be paying my mother's Nanny taxes instead (as if she was a Household Employee)?
One more thing: A tax preparer told us in the past that my mother must have a different address in order for us to be able to claim what we pay her under Form 2441. Is that true, or can my mother use our same address? PLEASE ADVISE. Thank you!