How should missionaries report their "working fund" as opposed to salary. Do they keep records themselves in case asked by the IRS? Are these funds reported by the supporting congregation/mission organization and then deducted as business expenses? Who is able to decide what constitutes a "working fund" expense as opposed to a salary item?
Although I'm not familiar with the term "working fund" I believe it is a sum of money sent to the missionary for ministry use (not personal use) without documentation expectations. The IRS calls these arrangements "nonaccountable plans" (see IRS Publication 15 for a brief definition, including "accountable" plan rules).
The quick answer to the questions posted is that the full amount received into a missionary's nonaccountable working fund is treated the same as his standard support. If the mission agency is treating the missionary as an employee (the standard method), then these amounts should be included in Box 1 (taxable compensation) of Form W-2.
To my knowledge, most mission agencies provide a level of accountability for funds sent to missionaries which will satisfy the IRS requirements for accountable plans. These plans follow IRS rules as to what is reimbursable as a business expense. In my opinion, this is a much preferable arrangement--both from the perspective of the taxpaying minister and from my perspective as a donor to missionaries who is thankful for the role of mission agencies that serve both missionaries and the congregations that support them. (I hope I didn't get too "preachy" here!)