Working for a daycare is almost always an employee situation, and she should have received a W-2.  As such, filing a SS-8 and Form 8919 is the proper way.

If for some reason you don't think she should be an employee, you can respond to the IRS notice indicating it was reported as "other income" because it was an isolated, sporadic activity and is not a business.  But almost certainly, she really is an employee.