Hi
@sam004 ;
The IRS decides custody based on where the child actually lives, not what any court order says. If the child lived with your friend (slept in his home) more than half the year (more than 183 nights) then your friend is fully entitled to the dependent and does not owe the other parent a dime. He may need to count the number of nights, and he should take steps to document it as well as possible, as self-defense against a complaint. Posts to social media showing that the child was in his home, date stamped photos, maybe a letter from the school showing that the bus picked up the child there. A letter from your neighbors if the kids play together a lot. Anything else that can show the child lived there more 183 nights. Going forward, I would take a selfie of the parent and child together at bedtime every day, make it a ritual, to prove the number of nights in the future.
If the child did not stay there more than half the year, then your friend is screwed because he relied on "verbal" permission. The IRS regulations require that, if he will claim the dependent, he must get a signed release form from the other parent and mail it in with his return. That release form can not be revoked by the custodial parent once filed. But since this was only verbal, he was not allowed to claim the dependent.
However, he probably does not owe her "all the money from his entire tax refund". What he can do is tell the mother to claim the dependent and print and mail in her tax return. Then she will get whatever amount she is legally entitled to, which may be a lot less than "his whole refund" especially if her income is lower. Your friend will file an amended return to remove the child dependent and pay back whatever *part* of his refund was due to claiming the child, which may be less than the whole thing.
