A portion of the amount in Box 10 of the Form W-2 (PDF) may be includable in your income. Please refer to the Form 2441 Instructions, Child and Dependent Care Expenses, 1040A filers refer to Form 1040A, Schedule 2 (PDF), Child and Dependent Care Expenses for 1040A Filers to determine how much, if any, of the dependent care benefits may be excluded. If you meet the requirements described in Form 2441 (PDF), Child and Dependent Care Expenses, you may be able to exclude all or part of dependent care benefits provided under a qualified employer plan. However, this amount is reduced or eliminated if your earned income (or your spouse's earned income) is less than the annual exclusion amount, or if your child is not under age 13. Any benefits that exceed the exclusion limit are also includable in your income, and your employer should have included these amounts in Boxes 1, 3, and 5 of your Form W-2 (PDF) in addition to reporting these amounts in Box 10. The amount you can exclude is figured and claimed by completing Part III of Form 2441 (PDF) or Schedule 2 of Form 1040A (PDF).

References:

• Publication 503, Child and Dependent Care Expenses
• Form 2441 (PDF), Child and Dependent Care Expenses
• Form 2441 Instructions, Child and Dependent Care Expenses
• Form 1040A, Schedule 2 (PDF), Child and Dependent Care Expenses for 1040A Filers

Source: www.irs.gov