It should not if you entered the correct information in the dependent screens for your daughter. The parent with whom the child spent the most nights is the custodial parent and can claim the child as a dependent. The custodial parent can give the other parent a signed form 8332 to give the other parent the right to claim the dependency and Child Tax Credit. The custodial parent retains the right to claim Earned Income Credit and Child and Dependent Care Credit as well as file as Head of Household if otherwise qualified.
If she is listed on page 1 under the dependents section on your return, her mother's return will be rejected. If she is not listed in the dependent section on your return, her mother's return won't be rejected.
Ok, that's what I was worried about. I have claimed her for all past years, but her mother finally had a job this past year and since we are 50/50 on custody, that's why I was going to let her claim my daughter this tax season. I am glad you responded, because I called someone at turbo tax and they told me I could leave her on there and get other credits (as she is my daughter) and let the mother claim the main credit. But sounds like that would of messed up her e-file, am I correct in that conclusion?
Yes, that is correct. The IRS only cares about actual nights the child spent with each parent, and to claim any tax benefits, that time has to be MORE than half the year, so you both you and mom cannot say that. Separated parents cannot split up tax credits (other than in the rare scenario I described above with the 8332 Form). Only one of you can use all of the dependents tax benefits each year.
All of the credits are generated from the ''How many months did the dependent live with you in 2020?'' question. If you both tried to do 6 months - neither of you would qualify for anything. So, in your situation, one parent will report 7 or more months and claim everything for that year (that is Mom this year). This is how you should do it every year if you two agree. When I say agree, I am not talking about the question in TurboTax about the ''agreement'' with the other parent and the 8332 form - that is only for the rare situation where you can split the credits. You two are just separated parents that will choose each year who will be the custodial parent - that parent will claim all the credits.