Your son doesn’t have to file a return, but he can file to receive a refund on his withholding. Some states have lower filing limits so it’s possible you may have to file a state return but not federal one.
He will report Form 1098-T and taxable scholarship on his tax return.
You can still claim your son as a dependent as long as you provide more than half his support.
The IRS has a great app for that: Whom May I Claim as a Dependent?
Tax Champ Carl says:
If the scholarships/grants exceed the qualified education expenses, then the student will report the 1098-T and all other educational expenses and scholarships/grants on the student’s tax return. The student will pay taxes on the amount of scholarships/grants that are not used for qualified education expenses. However, if the student’s earned income reported on a W-2, when added to the excess scholarships/grants does NOT exceed $xxx, then the student doesn’t even need to file a tax return, and nothing has to be reported.
See the full discussion at "I claim my son as a dependent. He has a taxable scholarship. Do I claim that income on my return or...
If your son’s income is still below the filing threshold with the addition of scholarship income, then he does not have to file, unless he wants his refund.
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