Do I need to add my dependent W2 to my tax return

No, you do not enter the child's earned income from wages reported on a W-2 on your tax return.

The child can file their own tax return and indicate on the return that they can be claimed as a dependent.

No, you don't add your dependents W-2 on your tax return. Your dependent will have to file their own tax return if they meet the filing requirements or file to receive a refund. Have your dependent review the TurboTax Help article Do I need to file a federal return this year? to determine if they have to file a tax return.

Who you can claim as your dependent is determined by their age, income and other eligibility requirements. Review the TurboTax Help article Who can I claim as my dependent? to determine if you can claim your child since they have earned income.