Does either of you have an amount for dependent care benefits in box 10 of your W-2? The dependent care benefits reduce or eliminate the amount of expenses that you can use for the dependent care credit.
If you don't have anything in W-2 box 10, there does seem to be a bit of a bug here, but it's easily bypassed. On the screen that says you don't qualify for the credit, ignore what it says and click Continue. The next screen will ask whose care you paid for. Select your child's name and proceed through the screens, entering all of the child care expense information. At the end it will give you the credit.
I don't know what conditions cause this error, but it must be uncommon because I have not seen other complaints about it. In fact, I got the same error in a test tax return, but I did not get it in a actual return that has child care expenses.
