Basically, if you go ahead and claim the dependent (which I recommend) you'll have to mail the return to the IRS yourself. Down the road when the IRS sees the child has been claimed on two returns, both tax filers will be audited (paper audit by mail). The loser (Presumably not you) will have to pay back some of their refund money along with interest and penalties.
The letter you get will ask you for proof the child lived with you, and provide a list of examples of things you can send to them as proof. For example, school/daycare records, medical appointment records, correspondence you've received for the child showing you are the "in care of" recipient, and a number of other things that I just can't recall right now.
This will be a "little" bit of a hassle for you. But it's worth it if you are "in fact" the one entitled to claim the child.
