MAYBE. First I updated the original answer since there is a better way of reporting the income if there is no 1099. It looks scary, but it's not really.
Next, this is what the IRS says:
According to the IRS:
“If your only income is a completely tax-free scholarship or fellowship grant, you don't have to file a tax return and no reporting is necessary. If all or part of your scholarship or fellowship grant is taxable and you are required to file a tax return, report the taxable amount as explained below. You must report the taxable amount whether or not you received a Form W-2. If you receive an incorrect Form W-2, ask the payer for a corrected one.”
The trick here is that it says "completely tax-free scholarship" but if the student is reporting it as income, it is not necessarily tax-free.
Here are the filing requirements for a dependent:
A return must be filed if:
unearned income was over $1,050, or
earned income was over $6,300, or
earned plus unearned income together total more than the larger of
• (1) $1,050, or
• (2) total earned income (up to $6,300) plus $350.
So here is where it gets funny. The scholarship income is not considered earned income, but if there is no tax, it is "completely tax-free scholarship" and he doesn't have to file.
FOR EXAMPLE: say the student needs to claim 5,000 in scholarship, it is not earned, but it won't be taxed (if that is his only income) SO.... looks like he would need to file because he falls under "Unearned income was over $1,050", but no, in this case he does not have to file a return because it is a completely tax-free scholarship. This income is confusing because it is treated as neither earned, nor unearned.
Got it? Seems confusing, but read, drink coffee, read it again. You can use the directions above, enter the amount on a return for the student. If the only income is the scholarship, and there is no tax due, the student does not need to file.
