No, you are not taxed on your forfeited amount in DCFSA.
In the follow-up interview questions after you enter your W-2, you will reach the screen Did You have a Flexible Spending Account to pay for child or dependent care? And you are asked to enter the amount if you had any money left in your account at the end of the year.
Enter the amount that was forfeited in that box. Even though you might think that there's no money in the account because you forfeited it, if you click the Learn more link you'll see that it says:
"The money you put into your Flexible Spending Account (FSA) has to be used by the end of plan year or you forfeit it, meaning you don’t get it back. Some employers let you carry left over money into the next year, but this doesn’t happen very often.
We’re asking for the amount of money you either forfeited because you didn’t use it by the end of the plan year, or the amount your employer is going to allow you to carry over into next year’s FSA (uncommon). Money that was not reimbursed (because you paid for something that didn’t count as a qualified expense) counts as being forfeited and should be included.
Don’t include any amounts you expect to be reimbursed at a future date."
If you enter the amount that you forfeited in this section, you will not be taxed on it.
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