One of my relatives, a green-card holder, provides babysitter for my 9-years-old son during this summer break. I have full-time job, while she does not work. I will pay her $2000 in total, and she helps me from 9am to 6pm every day. Do I need to file something related to taxes? For example 1099, or ask her fill up form W-9, or something else. I will report this expense as one of deductible item in 2006 tax return (I mean as Dependent Care expenses). She also likes to report this income and pay tax too, if any. What should we do for taxes? I appreciate any help you provide.

Thanks

If you intend to claim dependent care expenses for your relative, youmust report her income on Schedule H and pay Social Security and Medicare taxes for her. Because the income is so low, she will pay no taxes. You can require she pay half of the 15.3% that is the combined Social Security and Medicare tax rate.