1. If you indeed did have an agreement with your employer to contribute $5,000 by payroll deduction to a dependent care FSA, then this amount must appear in box 10 on your W-2. Please do NOT zero it out.
2. The dependent care FSA is a thing that the employer manages for your benefit - you contribute tax-free dollars to it, and then charge dependent care expenses to it.
3. The child and dependent care credit is intermixed with the use of the dependent care FSA. Any dollars that pass through the FSA cannot be used to calculate the credit (otherwise that would be double-dipping).
4. There is a maximum expense that can be attributed to one child, or to two or more children. It's $3,000 for one child and $6,000 for two or more children. If you contribute $3,000 or more to your FSA and you have the one child, then there are no dollars left to use for calculating the credit. If you have two or more children and spend $6,000 on them and also have $5,000 contributed to your FSA, then the first $5,000 is the limit for the FSA, which leaves $1,000 that can be applied to the credit.
5. Any dollars in excess of the $3,000 and the $6,000 provide no tax benefit for you as they cannot be used for the dependent care credit.
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