When you first enter the amount in Box 10, it will generate tax. The money in your FSA account is not tax-free unless you spend it on qualifying care, so it starts out as taxable. But after you enter all of your childcare expenses (and providers' SSNs or EINs), the income becomes non-taxable. Then if you have additional expenses above what was in your FSA, you may qualify for the Child and Dependent Care Credit as well.
Go back through the Child and Dependent Care interview section to make sure you have entered your expenses. The FSA funds will be non-taxable once those details are entered. How do I get to the Child and Dependent Care Credit in TurboTax?
You can also view Part lll of From 2441 to see your Box 10 FSA funds excluded from tax on Line 25.
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