Your IRA contribution is not permitted to exceed net earnings. Net earnings are net profit minus the deductible portion of self-employment taxes. With $7,000 of net profit, the deduction for SE tax is $495, so your net earnings are only $6,505. Anything contributed beyond $6,505 is therefore an excess contribution subject to penalty unless corrected by obtaining an explicit return of contribution before the due date of your tax return, including extensions.
