One of two things happened with your dependent student's tax return. One possibility is that someone filed a fraudulent tax return with his SSN. It could be someone in your family, even though you don't think so, or someone not in your family, possibly an identity thief who you don't even know. The other possibility is that he filed the earlier tax return himself, perhaps not having intended to file, and not even realizing that he did it. It sounds unlikely, but it does happen, especially with young people filing for the first time. A "system error" is very unlikely.
Since he told the IRS that he did not file the first tax return, they are now assuming that the first possibility is what happened, someone filed a fraudulent return with his SSN.
In any case, you and he must now both file by mail. You should mail your tax returns, in separate envelopes, by certified mail with a return receipt, so that you get tracking and confirmation of delivery. Your returns will probably be considered late, but there's nothing you can do about that now. If you get an IRS notice assessing penalties, you can request First Time Penalty Abatement.
It's not clear exactly how you made your payment, or what "held on my credit card" means. But if you made a payment for your 2022 tax return it will be applied to your tax, no matter how you file the return.
