Form 8332 only applies in the case of parents who are divorced or separated and sharing custody. It would not be used when you are sharing custody with your sister even if you wanted to it would have no force.
in the case of an aunt versus a parent, the aunt can claim the child instead of the parent if a child lives in the aunts home more than half the year. That’s really the only thing that counts. You don’t have to prove who paid the child’s financial support, you just have to be able to prove that the child lived in the aunts home more than half the nights of the year instead of your home.
The IRS may be looking at this because, if you have no earned income, you would be eligible for very little in terms of child and dependent credits. In other cases like this, people have been known to file falsely, by claiming that the child lived with someone else who would qualify for credits instead of living with the person who does not qualify for credits. The IRS may suspect you of the same thing.
You will have to do your best to find ways of showing that the child lived in the aunt’s home more than your home. You might have Facebook or Instagram posts that would show a background, you might have other friends or relatives who could write letters for you. The best kind of proof would be letters from reliable outsiders, like the doctors office, the dentist office, or the school district, dealing with the child’s appointments and bus routes and grades and so on, that were sent to the aunt instead of to you. That would go along way toward proving where the child actually lived.
Unfortunately, because other people commit fraud, you may have a difficult time approving your case
