Interesting question, seriously. I don’t know if it’s necessary to ask it 5 times, but interesting all the same.
Coparenting and child support are totally different things. Anyway, if she was defrauding the Government by not reporting child support, which is considered to be income, yes, she could be compelled to repay the benefits she received. That could be a judgment against her, reduction of HER benefits, seizing of her tax refund. In some States she could lose her car.
The problem is how your husband declared this monthly payment. Did he claim it on a tax return (laws have changed within the past 10 years)? Was he aware that she wasn’t claiming the payments as income? Were YOU aware or did it just come to your attention. I’d be very careful not to appear as a co-conspirator.
In general a State will not punish a child by lowering child support due to parental fraud.
I’m confused. You went to mediation and “settled.” Any agreement MUST be ratified (ordered) by a Judge. Did that happen?
I suspect that if your plan is to cause problems for her your effort is going to bite right back at you. Five Hundred a month for TWO children for ten years is ridiculously low in my State.
In SOME States child support paid outside a Court Order is a gift, not support, and the mother could file for retroactive support for 10 years.