Q.1. Does he have to file his own return because he has both earned+unearned income?
A.1. Yes
Q. 2. Can i report this on my return, although there is no way to report his $1,614 W2 income?
A.2. No.
If his only income is from interest and dividends, Alaska PFD or capital gains distributions shown on a 1099-DIV, there is a provision for entering it on your return, using form 8814.
But, it is still usually best for him to file a separate return, as qualified dividends and capital gain distributions could be taxed at a higher rate on the parent's return.
