Here are a few things to note.
Part 1 - Your employer, whom you enrolled in the Dependent Care Benefit (DCB), does not look at you spouses income and work. That is verified on the tax return. So if you enroll for the full $5,000, your W2 taxable wages for federal, state, social security, and medicare taxes will all be $5,000 less than if you did not enroll (automatically saving $382.50 in FICA taxes). You then need to submit qualified expenses to your employer to be reimbursed. You can even have the child's grandparents babysit (or anyone other than a spouse or other dependents) if you submit to your DCB administrator a signed claim form that has their address, tax ID, and amount claimed.
Part 2 - Completing Form 2441 on your tax return. It is the end of the year and you have a W2 showing $5,000 in dependent care benefits. But your spouse has $0 income for the year (or any amount less than the $5,000 benefit). The Form will now show the benefit is TAXABLE and will add it to your wages at the top of your tax return. This means that your employer may not have withheld enough Federal and State Income Taxes to cover the amount due. HOWEVER, the amount still shows as exempt from social security and medicare so even if only one spouse works, it still nets a savings of $382.50.
