Fraud?

[Fargofoster]

My tax return was rejected because the bio parents of my foster child claimed her as a dependent before my claim was processed. They haven’t seen her nor provided for her care in over 2 years. 
What do I do?

[Opus 17]

Print your tax return and mail it in. When the IRS gets around processing it, they will pay your refund based on you claiming the dependent. Then, they will send letters to both sets of parents to start an investigation and you will have to send the IRS proof that the child was your dependent.

Because the IRS is not processing paper tax returns at this time, if you are expecting a large refund, your other option would be to remove the child as a dependent and file the rest of your return electronically.  Then, when things get back to normal, you can file an amended tax return it to add your dependent.  After the amended return is processed, the IRS will start the same investigation of the dependent claim.

Because of the delays this year due to the coronavirus, I think there are going to be a lot of back logs at the IRS. If you can afford to wait on your refund, I still think it would be better to mail one original return with the dependent, instead of e-filing a partial return and then filing an amended return later.

[Carl]

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.