There really isn't a need to report it, per se. Just file your return, claiming your daughters, by mail.
Unfortunately, you won't be able to e-file due to limitations of the e-file system.
The IRS will process your return with your children listed as your dependents as filed, upon receipt. Later in the year, typically a month or so after the extension deadline (October 15, 2021) the IRS computers begin running a variety of matching programs. At that time, letters are sent to all taxpayers who list the same dependents on a return asking them to amend if the dependents do not meet the criteria for dependents.
If no taxpayer submits an amended return to remove duplicate dependents, then the IRS again sends letters asking for certain documentation to support that the dependents should be claimed by the taxpayer. They will tell you which specific documents they require at that time and tell you where to submit the documents.
After determining which return has the right to claim the dependents, the IRS will remove the dependents from the return(s) that are not entitled to claim them, and issue a bill to the taxpayer(s) for the amount of the tax and any penalties and interest owed as a result of the claim. If certain credits are claimed that should not have been, the taxpayer may be barred from taking those credits for a period of up to ten years, even with other dependents.
The IRS will not share with you any information about any other taxpayer who may have claimed the children.
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