He is living with us and we are meeting all his college education and personal expenses. He has a small job with minimum wages and limited hours. My wife and me working and we file jointly with two sons as dependent. Whether he has to file independently or not or include with us? If he files separately whether I can claim him as a dependent or not?
Follow this link to read about the IRS-Tax Benefits for Education as it applies to you and your son: http://www.irs.gov/uac/Tax-Benefits-for-Education:-Information-Center
I am a Registered Investment Adviser and cannot really provide tax advice; however, I'm know you can contact your local H&R BLOCK office or your existing tax adviser for the latest advice to your question with a simple phone call as your prepare for your tax return(s). They expect calls like this at this time of year.
Most likely (based on what you have stated) you will be able to claim your elder son as a dependent. You will not include his income on your tax return.
Your son will file a tax return and on that return he will indicate that he is claimed as a dependent on someone else's return and include his income. He may or may not have taxes due depending on how much he made. His refund or amount owed will depend on how much his employer withheld.