My daughter does a lot of pet sitting and babysitting. She received $1,025 in 2009. Someone told me a child does not have to pay taxes unless they earn at least $2,000. True?

She doesn't have to pay taxes.

Tick

Tickle,
I guess I need to say where I live - in the USA.

Tickle,
I guess I need to say where I live - in the USA.

US would probably follow same guidelines as Canada and I would have to say that your daughter doesn't have to pay tax on that little amount of money she makes. Or in other words, even if she does, why report it unless you want to make an object lesson out of it.

Tick

My daughter does a lot of pet sitting and babysitting. She received $1,025 in 2009. Someone told me a child does not have to pay taxes unless they earn at least $2,000. True?

This is self employed income. You can not include your daughter's earned income on your tax return. She must file separate tax return as the income is $400 or more. This income is also subject to SE tax at 15.3%. If she is dependent, she will not claim her own exemption on the tax return.
You are self employed or independent contractor. You must file your tax return if yourself employed income is $400 or more. You will report your income and business related expenses on schedule C-EZ (Form 1040). Then you put net income (or loss) on line 12 of Form 1040. This income is subject to SE tax at 15.3% (this is shown on line 57 of Form 1040). Your U.S. Tax Return: Tax Filing by Self Employed Sole Proprietor or Independent Contractor (http://taxipay.blogspot.com/2008/04/tax-filing-by-self-employed-sole.html)

Assuming that your daughter is your dependent, then she has to file only if one of the following apply:

1. Her unearned income (from investments) is more than $950.
2. Her earned income is more than $5,700, or
3. Her gross income was more than the greater of (a) $950, or (b) her earned income (up to $5400) plus $300.

Based on baby sitting income of $1,025, it seems she does not have to file UNLESS she also has unearned income of $300 or more.

You can see the filing requirements for depenedents on page 4, Table 2 of: http://www.irs.gov/pub/irs-pdf/p501.pdf