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Youre receiving a tax benefit because under the plan, youre not paying taxes on the money set aside to pay for the dependent care expenses. You must complete and attach Form 2441, Child and Dependent Care Expenses to your tax return.
Employers can also choose to contribute to employees dependent care FSAs. However, unlike with a health FSA, the combined employer and employee contributions to a dependent care FSA cannot exceed the IRS limits noted above.
Box 10 of your W-2 shows the total amount of dependent care benefits that your employer paid to you or incurred on your behalf.
As per the Internal Revenue Services (IRS), the benefits related to the care of dependents are tax-exempt; hence, they can be claimed on the tax return. The credit applicable to the dependent care benefits can reduce an individuals taxable income by hundreds or thousands of dollars.
A flexible spending account (FSA) allows employees to be reimbursed for medical or dependent care benefits from an account they set up with pretax dollars. The salary-reduction contributions arent included in taxable wages reported on Form W-2 Wage and Tax Statement and they are not eligible as tax deductions.

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When you choose to participate in a dependent care assistance program through your employer, your employer has to report that value in box 10 of your Form W-2. This type of plan is a voluntary agreement to reduce your salary in return for an employer-provided fringe benefit.
Box 10 of your W-2 shows the total amount of dependent care benefits that your employer paid to you or incurred on your behalf. Amounts over $5,000 ($2,500 in the case of a separate return filed by a married individual) are also included in box 1.
Box 10 on your W-2 form should indicate the total annual amount of your Dependent Care FSA deductions. When completing your tax return, you will need to attach a Child and Dependent Care Expenses form (Form 2441 for a 1040 return; Schedule A for a 1040A return).

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