No, don't update income. Let TurboTax do any automatic adjustments necessary.
No, the forfeited amount is not added back to income. Your issue is that you also don't receive it - the employer reabsorbs it.
This is fair - you don't receive the money so you don't report it as income.
Yes, if you spent more than $6,000 on child care and have two kids, then the max credit is (in your case, depends on AGI) 20% of 6,000 = $1,200.
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