You would
not report her W-2 income on your tax return.
If the W-2 for $735 is the only income she received in 2017, she does not need to file a tax return UNLESS the employer withheld federal and/or state taxes. If they did, she can file a return to get a refund.
If she files a return, she should answer "Yes" to the Personal Info questions: Can someone else can claim you as a dependent? and "Will someone else can claim you as a dependent?".
