Flexible-spending accounts (FSA) offered as an employee benefit by some larger companies allow people to set aside pre-tax dollars to reimburse themselves for child-care expenses. The savings equal the taxes they would have paid on these funds. There is one catch (isn't there always?) -- if you don't have enough reimbursable expenses submitted for any given year, the excess money is forfeited to your company. Therefore, you want to make sure you do not set aside more money than you need because you must "use it, or lose it".
Even if your employer does not offer a dependent care FSA, you may be able to claim a child care credit on your federal tax return. (See Publication 503 for more details) In either case, you should complete Form 2441 and attach it to your annual tax return to either claim the credit or report FSA monies. If you use an FSA, the amount of money you set aside will appear on your Form W-2 as child care benefits, and you must complete Form 2441 to ensure these "benefits" (your money) are not taxed.
We recommend that you consult a tax professional to make sure that you obtain all the tax benefits to which you are entitled.