NO ... not a bug ... the program follows the IRS regulations and the IRS rules on an income tax return are superior to any civil court ... what a divorce decree says is immaterial .... it cannot override federal tax laws .... now if the custodial parent MUST release the exemption to the non custodial parent then they MUST give the other parent a form 8332. The child cannot be divided to 2 tax returns in any other way then it is listed above ... so the non custodial parent CANNOT take the day care credit EVER ... this cannot be dictated by any civil court. All the non custodial parent can take is the exemption and the CTC.
So the custodial parent claims the 2441 on both kids, gets the EIC on both and uses one of them for HOH filing status. ALL the child care expenses, no matter who paid them, goes on this person's return ONLY.
And the non custodial parent can only list the kids as dependents and that gets them the CTC as well. This is all they are allowed per the IRS rules. See Special rule to divorced or separated parents (or parents who live apart) on page 32:
<a rel="nofollow" target="_blank" href="
https://www.irs.gov/pub/irs-pdf/p17.pdf">https://www.irs.gov/pub/irs-pdf/p17.pdf</a>
