She is not required to file (see rules below) but is allowed to file if she needs to get back income tax withholding. She cannot get back social security or Medicare tax withholding (boxes 4 & 6 of the W-2)
Scholarships that pay for qualified educational expenses (QEE) are tax free and do not need to be reported on her tax return. QEE is tuition, fees and course materials (books and required computer). Only if box 5 of the 1098-T exceeds box 1 is there a possibility that some of her scholarship is taxable.
You do not report his/her income on your return. If it has to be reported, at all, it goes on his own return. If your dependent child is under age 19 (or under 24 if a full time student), he or she must file a tax return for 2021 if he had any of the following:
- Total income (wages, salaries, taxable scholarship etc.) of more than $12,550 (2021).
- Unearned income (interest, dividends, capital gains, unemployment) of more than $1100.
- Unearned income over $350 and gross income of more than $1100
- Household employee income (e.g. baby sitting, lawn mowing) over $2300 ($12,550 if under age 18)
- Other self employment income over $432, including money on a form 1099-NEC
