It may be tempting to add your noncustodial children (when the other parent is the custodial parent) or your mother-in-law (she's at the house all the time anyway) to your federal income tax to gain the extra exemption.
Likely consequence: Claiming the wrong number of dependents is one of the easiest mistakes to get caught on. This is because the IRS asks you to confirm the name and Social Security number of dependents. The IRS matches those numbers to a database; claiming the same dependent as another taxpayer may raise questions or result in an automatic rejection of your claim. What's more, adding or removing dependents from year to year without explanation may trigger an audit. The IRS has been very proactive in its investigations of taxpayers committing fraud by using this technique. Taxpayers who make fraudulent claims on their tax returns may be subject to civil and/or criminal penalties. And penalties can reach as much as 75% of the tax that you didn't pay if the IRS determines you committed fraud.