Form 8814 is not the problem. The reason TurboTax told you that the child's income does not have to be reported is that you did not enter the Alaska Permanent Fund Dividend correctly. On the screen where you enter the amount, note that the description for the box where you enter it says "Alaska Permanent Fund Dividends (included in "Ordinary Dividends" above)" [italics added]. You must enter the PFD amount, $1,600, in both the first box, "Ordinary Dividends," and in the box that says Alaska Permanent Fund Dividends. See the screen shot attached below. When you enter the amount in both boxes, TurboTax will handle it correctly. If you don't enter it in the Ordinary Dividends box, TurboTax thinks the child had no income, so it tells you the child does not have to file.