1099-Q and 1098-T

It depends, but probably not. You are correct, since the 1099-Q is in your son's name as the recipient, it would be reported on his return if necessary. 

If your son had any qualified education expenses in addition to his tuition, such as books, supplies, and even room and board, you could allocate the 1099-Q to cover those expenses. In that case, they would not be taxable. Of course, he could also allocate the tuition that was not covered by the scholarship to be covered by the 1099-Q. However, if you do not use the 1099-Q distribution on tuition, that allows your son's tuition expense to be eligible for an education tax credit if you would otherwise be eligible.

If you are not eligible for any education credits, then certainly your son will not have to file if this is his only income. The amount of 1099-Q income does not reach the threshold of $1,100 for dependents to report their income after deducting the tuition. 

If he has other income, either earned from a job or unearned from dividends and capital gains, he may be required to file. In that case, you would enter the 1099-Q, deduct any qualified education expenses and TurboTax will determine the taxable amount. Only the earnings are taxable. 

If you are taking an education credit and your son is eligible for the American Opportunity Credit, that means $4,000 of the tuition will be used to maximize the credit. That leaves only $1,624 of tuition expenses, $1,450 of scholarship, and a $4,731 withdrawal. If he has enough other education expenses besides the tuition to entirely offset the scholarship and 1099-Q withdrawal, then nothing would have to be reported on his tax return. Otherwise, he would have to include the withdrawal that was not used on qualified education expenses and add that to his other taxable income to determine if he is required to file. 

Q. Does my son need to file his own tax returns and Will he be taxed on the earning portion shown in form 1099-Q?

A.  Simple answer: No, he does not need to file a tax return.  Based on your numbers, a small portion (~$300) of the distribution is taxable. But, it is not enough to trigger a filing requirement (<$1100)*.  

But, you may want to have him file and pay some tax on some of the distribution and his scholarship to allow you to claim the tuition credit (your income must be less than $90K [$180K Married filing jointly]). 

Here's how that works: you use $4000 of tuition to claim the credit (that credit is worth up to $2500).   That $4000 is no longer available to apply against his 1099-Q.  So, more of the $2561 earnings becomes taxable (~$1670).  Taxable scholarship is taxed less, so declare that as income first.  If you want to do this (and are eligible), reply back for instructions. 

*Technically you may be required to file form 5329 to claim the 10% penalty exception ( scholarship).  Form 5329 can be filed alone (separately from a tax return). But that may be a hassle just to tell the IRS you don't owe them $3.