snowingbird,
Interestingly, a taxable scholarship is treated as earned income when it comes to the dependent's standard deduction but unearned income when it comes to the so-called Kiddie Tax. To determine whether that $5K was taxable, we must turn to the 2020 Form 8615 and the companion 2020 8615 Instructions . In that form, line 1 would have $5,000, line 2 $2,200 and line 3 $2,800. Line 4, her taxable income, is the larger of $0 and $4,650 ($5000-$350) plus the lesser of $12,050 and the scholarship income. This turns out to be $0 which is carried to line 5.
Bottom line: her taxable income being $0, there is no regular tax and Form 8615, line 5 being zero, there is no kiddie tax. So she won't owe anything for 2020. However, yes she does need to file a 2020 tax return with the IRS and likely a state tax return, though I would need to know which state in order to determine that.
Specifically, the 2020 Form 1040 instructions state a dependent must file a return if
... any of the following apply.
• Your unearned income was over $1,100. [In this case, yes]
• Your earned income was over $12,400.
• Your gross income was more than the larger of—
• $1,100, or
• Your earned income (up to $12,050) plus $350
