In Turbotax, she needs to list the children in the dependent interview. When she runs the interview questions, she will be asked where do the children live most of the time (with her). Then she will be asked if she signed a form 8332 release for the other parent (she will say yes). Her tax software will list the children on the return in such a way that she qualifies for HOH and the dependent care credit but does not claim the $2000 child tax credit. This should not cause any conflicts with your return, as long as you indicated on your return that the children did not live with you more that half the year and you did have a form 8332 to claim them.
If she is filing on paper, she must list the children in the dependent section on the front of form 1040 and not check the box for the child tax credit or the box for other dependent credit.
