Yes, since your spouse earned $1,700 you can put that amount into a DCFSA as long as your income and the amount you actually pay for care are higher. If your spouse starts working again, you will be able to add more to the account up to their earned income for the year or $5,000.
As a follow up, I noticed the point of "actively seeking work". How does the IRS verify that my spouse was actively seeking work? Is it just me stating she was? Or does it only matter in an audit?
Are you talking about January 2025? If your spouse is not getting earned income for any month in 2025, you need to be able to show in an audit that your spouse was actively looking for work: job interviews, temp work, and so on.
Yes, it is just you saying so...until the IRS asks you to prove it...not that this may not be in an in-person audit, but it may be just a "letter audit" wherein the IRS asks by letter to show some evidence of this or that. So your spouse needs to work soon, or becomes a student.