You complete a tax return for your dependent(s) just like you do your own. They will have only their income to report. In your case only one child is required to file a federal return because the distribution is over the filing requirement. The other is not required to file a federal return if the exact amount is $1,100.
The federal filing requirement for dependents is as follows:
- Unearned income over $1,100 (the retirement payment is considered unearned income)
Sometimes you are required to file Form 8615 for children who have certain income. Form 8615 - Who Must File
You will need to review your state requirements and you can use this link to check your state: Do I need to file a state return?
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