FSAs operate with a "use it or lose it" policy, meaning that you must use all of the money you deposited into the account for qualified expenses by the end of the plan year or you will lose your money. Since you received a tax deduction on $5K of your income, but only used $1K of the money, you are required to pay the taxes back on the $4K that you did not use. If you had other child care expenses, you can enter these in the Dependent Child Care Credit section which will keep those funds tax-free.
Many employers will offer their FSA participants a grace period or a rollover provision, which ensures you won’t lose funds as soon as a new plan year starts. See your employer’s benefits guide or HR representative if you’re unsure if you have one of these options. @piniu
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