My 13-year old daughter worked hard last year and earned $4,250 by babysitting and walking dogs around the neighborhood (i.e. she freelanced and was not employed by anyone). I decided that she would file her own tax return for the first time this year because I wanted to open a Roth IRA for her. I opened a Roth IRA for her and deposited the same amount ($4250) into the Roth IRA account in December.
I then started a new tax return in Turbotax, just for her. I inputted $4,250 as "Business income" and I did not report any business expenses or deductions -- only income. When I went to report how much money I had deposited into the newly-created Roth IRA ($4250, which is the max, based on how much she made babysitting/dog walking), Turbotax told me that my daughter's earned income is only $3,949, or $301 less than the total I reported she earned as business income. I can't figure out why the earned income is different (less) from the business income, given that she had no business expenses to deduct from income. Turbotax is telling me that I deposited too much into her Roth account as a result. Any suggestions?
