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How will the IRS ever know about these payments? How am I supposed to alert them?

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Thanks for the info. Actually, there is a signed caregiver contract between sister and mom. It states that mom will pay sister $1750 per month. When mom applied for VA Aid and Assistance benefits, the company we used to file our paperwork, provided the contract.
It has been in force since April 2017.
I am seeing a tax guy tomorrow, but I wanted to ask you folks first.
Any words of wisdom?
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Fullerton, your sister is getting an income of $21,000 a year. Your Mom would need to prepare a 1099 for your sister which shows her income, and payroll taxes [Medicare and Social Security taken out] unless your sister was paying her own quarterly "estimated IRS taxes".

Thus, if there is no signed employment contract, and no payroll taxes were taken out, and Mom didn't prepare a 1099 for your sister, then your sister needs to see a CPA or experienced tax preparer to find out what does she need to do.

If for some reason within the next 5 years your Mom needs to qualify for Medicaid, Medicaid will see a payment of $1750 per month and that will be questionable. Thus, Medicaid could consider the $21,000 a year a "gift" to your sister unless there was an employment contract. And without a contract this amount is over the allowed $15k per year as a gift, Mom could be subject to paying a gift tax to the IRS.

Yes, all of this can be so darn complicated. It shouldn't be this way :(
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