Are minister's predetermined charitable contributions to his own church not included in taxable income on W2?
I have a new client who is a minister. He has made an agreement with his church that they will take a predetermined amount from his salary, donate it to itself, and not take tax out of that part of his salary.
His previous tax preparer said that this is not taxable income because he never received or had access to the money, so this minister has done this for the past ten years and does not want to change.
I think this is very risky for him and the church since most people should include this in taxable income and then claim it on their tax return as an itemized deduction.
There are multiple things on my W2 where my employer pays for a benefit or donation on my behalf that I never see the money but pay tax on.
My employer actually has a forced donation to United Way taken out that I pay tax on. Is there a special rule for ministers, though?
In all my research on the internet, I can't find anything that says this approach is reasonable, but I have found sources online that say ministers should recognize them as an itemized deduction just like everyone else.
If anyone else has taken this approach, do you have backup you can provide to help me justify it going forward?