Can my husband's ex wife start claiming the children that live with her on her tax return, despite that on the divorce contract stipulates that children will be claimed every oher year? And they have claimed them every other year for the past 5 years, now the ex-wife decided to claimed her children every year, is it possible to do this, is it legal? She mentioned the Tax Relief Act of 2004. They were divorced on 1999.

You and your husband have to follow the requirements of the divorce decree. You have that court order, so you can claim them, if anyone else does on that monthy they will be in violation of IRS rules and that will be their problem.

If your husband's ex-wife claims the children and it is not her year to do it - the IRS will pick that up. It will be her problem, not your husband's. The IRS will investigate - trust me. My ex did this to me and he got caught. If you are inclined to do so, you can report her fraud to the IRS.