Yes, your stepdaughter will be able to get a refund of the federal taxes that were withheld. And yes, she will file as a dependent and not claim herself.
When she files her return:
"If you qualify to be claimed as a dependent, you must answer “yes” that you can be claimed as a dependent on someone else’s return. You’ll also be asked if the person who could claim you, will claim you, which only impacts your eligibility for certain education credits."
Please see this TurboTax Help article about filing taxes as a dependent.
@MrMatrix
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