Here is where there is confusion ... even though you can put INTO the FSA account at work pre tax if you do not have qualified expenses on the Child Care Credit form 2441(due to a non working spouse or less child care expenses) the FSA contribution is added back into your wages on line 1 of the form 1040 thus negating the tax free aspect of this situation.
Now for clairity ... your contributions are exempt federal/state and FICA taxes on your paycheck then if you cannot use the credit the amount is added back into wages for federal/state purposes but it still escapes the FICA taxes so worse thing that happens is you save the FICA taxes ... $2750 x 7.65% = 210.38 saved.
