I'm Anne. I've been preparing taxes for 27 years and I'll be happy to help you.
If this person watched the children in her home, then according to the state, she is Self Employed. This is especially true if she watches children from more than 1 family.
She may, however, deduct her expenses that she incurred while watching the children. This would include food, paper products, games/books, outings, "equipment" such as high chairs, baby swing, play pen, etc.
If she's licensed through the state, then she can write off a % of her utilities, repairs on her home, improvements such as fencing, etc and she can depreciate a % of her cost basis of her home.
The only other option that would make her an employee as opposed to self employed is if she watched the children in THEIR home. If this is the case, then the people who hired her to be their private "nanny" (as it's called) need to issue her a W2.
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