I think the reply below is misleading
"How much was the scholarship? The IRS treats it as earned income with respect to dependent's standard deduction, i.e. compare scholarship+$400 to the $1,150 default. If the scholarship was more than the 1099-NEC value minus $400, then her taxable income would be zero and the kiddie tax would be zero. If not, you would want to compare the ~$400+ self-employment tax for Schedule C (15.3% of the net Schedule C income) to the roughly 24% tax on the scholarship+700(=$3,000-$2,300) that would arise via form 8615."
The scholarship only gets treated as earned income if you are reporting it as income ie paying tax on it. So it doesn't help with the tax on the 1099-NEC income. You'd only report the scholarship as income if it wasn't used for the purpose it was granted for or if you were doing so because it increased the education credits on the parent's return.
