but the IRS rejected the return with the reason that she cannot be shown as spouse on another return. Why is this being rejected when turbotax allowed her as dependent knowing she was married but not filing joint return?
I had my daughter send me their TurboTax created Tax return, and it does have selected that my daughter can be claimed by someone else as a dependent, and it is also Married filing separately. So no issues on their return, so why was mine rejected by IRS when all is correct?
The son-in-law needs to select that someone else can claim his spouse. This is asked in the interview questions in the "My Info" section.
TurboTax allowed it because you told Turbotax that she and her husband was allowing you. to claim her.
The son-in-law needs to amend his return. Have him pay close attention to the part where the program asks if someone else can claim the spouse.
He will need to mail his 1040X and you will need to mail your return claiming your daughter.