collapsible transaction theory?
This is my first year as treasurer. Last year my pastor went to have his taxes done and was told to get a new W-2 that has his wages on it minus the ammount that he tithed to the church.
His tax preparer called it the collapsible transaction theory.
I can't find any information on the web of what that is or how it works. However, in some of his notes taken from that meeting with the preparer is written "take 10% off (tithe ammount) to go to church instead, that way we are not taxed on self employment and cheritable".
In addition to that, in his taxes last year he was taxed for being self imployed as a minister, even though he is employed by the church. What do I need to do on his w-2, and what do I need to tell him about his tax preparation?Know the answer? Face the same situation? Please post your answer or comment by using the "comment" link below. Thank you!