The only person with the automatic right to claim a child as a dependent is their parent, if the child lives with the parent more than half the nights of the year.
Your parent—the child’s grandparent—can claim the child as a dependent if the child lives in the grandparent’s home for more than half the nights of the year. If you also live in the same home as the grandparent and the child, the grandparent must have more taxable income than you.
If the other biological parent does not have actual physical custody more than half the nights of the year, then the only way the other biological parent can claim the child as a dependent is if you give the other parent a signed form 8332 dependent release. This will allow the other parent to claim the child as a dependent and get the $2000 child tax credit, but it does not allow the other parent to claim the child for head of household status or an earned income credit. The other parent would indicate in their tax program that they had custody less than half the nights of the year, and that they have a signed release form from the other parent. They would then be required to mail the original signed copy of form 8332 to the IRS within three days of e-filing the rest of the return.
If done correctly, there is no particular reason this would trigger an audit, it is part of the regular rules and procedures. The question is, are you willing to sign form 8332 and allow the other parent to claim the dependent instead of you or your mother? Or do you have a divorce order or a custody order that requires you to sign the form so the other parent can claim the dependent?
