She has to file Form 8615. She has unearned income over the allowed amount.
For tax year 2021, the Kiddie Tax applies if your child has unearned income (usually from investments) exceeding $2,200.
Form 8615 must be filed for any child who meets all of the following conditions.
- The child had more than $2,200 of unearned income.
- The child is required to file a tax return.
- The child either:
- 17 or younger at the end of 2021
- 18 at the end of 2021, but only if their earned income (excluding scholarships in the case of a full-time student) didn’t exceed half of their support costs in 2021.
- Was a full-time student at least age 19 and under age 24 at the end of 2021 and didn’t have earned income that was more than half of the child's support.
- (Unearned income and support are defined below.
- At least one of the child's parents was alive at the end of 2021.
- The child doesn’t file a joint return for 2021.
For these rules, the term “child” includes a legally adopted child and a stepchild. These rules apply whether or not the child is a dependent. These rules don’t apply if neither of the child’s parents was living at the end of the year
Please see this answer by macuser22.
Unearned income defined.
Unearned income is generally all income other than salaries, wages, and other amounts received as pay for work actually done. It includes taxable interest, dividends (including capital gain distributions), capital gains, unemployment compensation, taxable scholarship and fellowship grants not reported on Form W-2, the taxable part of social security and pension payments, and certain distributions from trusts.
Unearned income includes amounts produced by assets the child obtained with earned income (such as interest on a savings account into which the child deposited wages).
