My daughter comes daily to feed and help my Mom while I'm at work. We pay her $20 per hour. Does she have to declare this as income to IRS?

I believe she does. I'd recommend seeing a tax professional on this. It's a fine line between extra income vs. Employer/employee. There is a maximum amount to be considered as extra income. Go over and it's now a difficult scenario. As employer/employee -both of you are subject to state/income tax.

Strictly speaking, she is "self-employed", or else she is your employee and you should pay the "nanny tax", which is a somewhat complicated issue.

Another way of looking at it is that if her income for the year is more than $5,950 and she is your dependent then she "should" file. Do you claim her as a dependent on your taxes? If not, she can earn up to $9,750 without having to file. Source: IRS 1040A instructions for 2012.

your mother cant necessarily claim the wages for credit on her fed taxes cause she probably pays no fed tax. under 600.00 a year in cash doesnt have to be claimed for your daughter, anything over that does. id pay her cash.

I don't know what the minimum is, but under a certain amount of annual income you don't have to file. I would google the question: "what is maximum income I can make without filing taxes"?