If the child has a prior passport, it must be sent in. Because they will punch the cover to indicate it is no longer valid to use before sending the old one back. My DD just got a new passport in the fall and we sent the old one in with the application to get the new one. Her original one was issued when she was 11 and she's now 16, so this new one is considered an "adult" passport that is good for 10 years.
One odd thing happened when we went to our appointment at the post office to submit the application. The employee helping us asked for photo ID from her. I pointed to the current passport I'd handed him and said, that's her photo ID. He told me he needed another photo ID like a drivers license. I pointed out she had just turned 16 a few weeks before and didn't have a drivers license yet. Eventually, I pulled out the documentation I'd printed and showed him that between the old passport and her birth certificate we'd presented, we'd more than satisfied the ID requirements to submit the application. He relented but it left me a little unsettled that someone taking passport applications would be so confused about what was required.