Could someone clarify this issue for me?

I set up a Roth IRA for my 12-year old who receives income for delivering papers and refereeing soccer. His total income for 2006 was about $1200 . I happily "matched" this amount and placed $1200 in a Roth in his name. This is obviously well within Roth limits.

It turns out that he needs submit a 2006 tax return since both "jobs" classify him as self-employed and no taxes were paid on his income. So, he will have a tax bill of ~15% hit to cover FICA & Medicare (poor kid!).

So did I make a mistake putting the full $1200 in the Roth? Or should it have been 15% less than that? Presumably I have until April 17 to remove 15% if $1200 was too much.

Thanks for clarifying

Dave