Yes, my mistake. When you both qualify due to more than half the year, then either one can choose to claim the dependent and no forms are needed. If you disagree on who should claim the dependent and both of you claim them, the IRS will give it to you due to the tiebreaker rule.
There are actually a large number of options here. With respect to each child, you have 4 ways to file:
1. You claim full dependent, he gets no benefits (he can't use the FSA).
2. You claim custodial dependent for HOH but sign a form 8332 releasing the dependent exemption and child tax credit to him. (He still can't use the FSA.)
3. He claims full dependent (he can use the FSA).
4. He claims custodial dependent for FSA and gives you a signed release form allowing you to claim the dependent exemption and child tax credit.
#3 or #4 allow him to use the FSA, but will cost you some money. How much is impossible to say.
Depending on the actual care costs and children's ages, he may get a large benefit from claiming at least one child but a much smaller additional benefit for claiming the second child.
Then the question is how to make you whole when you amend. (If you decide to amend, don't agree on a dollar amount until after you prepare the amended return and see what the impact on you will really be.)
You may want some help from someone who can sit down with you and your ex in person. There are free volunteer tax services for low income taxpayers all over the country, if you don't want to pay for your own advisor.
