State Agency Payments for Child Care
Payments from state agencies to family caregivers who care for children are taxable and may be found on Form 1099-MISC in either box 7 or box 3.
State agencies may not know if the family caregiver(s) are operating a day-care center and may prefer to report the payments on Form 1099-MISC, box 7.
If the family caregiver is running a day-care center business, these payments are subject to self-employment taxes. For additional information, see Form 1099-MISC Instructions for reporting boxes 3 and 7.