Yes, you do not qualify for the Child and Dependent Care credit because it was paid for with pre-tax dollars from your FSA.
Qualified expenses that appear in Box 2c only include out-of-pocket expenses.
As for the wrong carryover appearing, I would check the entries on your W-2. Once you enter $5,000 in Box 10, TurboTax asks some follow-up questions about the dependent care benefits:
- Did your employer provide on-site child care?
- Did you have an FSA to pay for child or dependent care? Answer Yes.
- If you had any money left in your account at the end of the year, enter the amount here. If you used it all, just enter 0. Enter 1,573.
