Q. They made $5665 in W2 income from a summer job and $7990 was paid from a scholarship. Would they need to file a federal return?
A. No. That's less than $14,600 total. That answer assumes that the $7990 includes the additional taxable scholarship (usually $4000) that allows you to use the loophole. Either way, you may want to file anyway, to document the reporting of the scholarship income.
I'm not specifically familiar with NJ rules. But, it appears they have a $10,000 filing requirement. In TurboTax, you'll have to first prepare a federal return before you can prepare a NJ return.
Scholarships are a hybrid between earned and unearned income. It is earned income for purposes of the $14,600 filing requirement (2024) and the dependent standard deduction calculation (earned income + $450). It is not earned income for the kiddie tax and other purposes (e.g. EIC). For grad students and post grad fellows (but not undergrads), scholarship, stipend and fellowship income is earned income ("compensation") for IRA contributions.
Taxable scholarship goes on line 8r of Schedule 1, from which TT treats it as hybrid income.
