First, decide how you want to file. If you want to file jointly, print your return and mail it. Your wife's parents can't claim her as a dependent and the IRS will contact them about the situation. In most cases, you will save more money filing jointly than your in-laws will lose.
However, if you agree to file separately to allow your in-laws to claim your wife, then you need to file 2 new tax returns, as "married filing separately." I don't think you can "clear and start over" after you have actually transmitted your return, so you can't use your existing account to file one of the separate returns. You will need two new accounts, each of which will be charged separate filing fees. You will have to call customer support to get the charge from the rejected joint return to be applied to one of the separate returns. Your wife will check the box on her separate return for "I can be claimed as a dependent by someone else." Be aware that when filing as married filing separately, you will probably pay more tax, because many deductions and credits are reduced or disallowed, especially if you have children.
