Tax returns in Germany: What you need to know

Do you get a sinking feeling in your stomach at the mere thought of having to do your taxes? There’s really no need. For a start, it’s not always necessary for you to submit a tax return in the first place. And even if you do, it doesn’t have to be the chore it might appear. Read on to find out why it might make sense for you to file a tax return, when you should do it and what you need.

Tax returns: Why it’s something worth looking into

• It's worth it: In 2019, people in Germany received an average of €1,095 back in tax rebates.

• It’s (usually) voluntary: In most cases, you don’t have to file a tax return, but if you do, it’s usually worth the effort.

• It's not too late: You can still file your voluntary tax return retroactively for 4 years. 

• It’s not difficult to prepare: In fact, you only need three things: Income tax certificate, tax number & tax identification number

• There are helpful tools: With the web-based German tax software ELSTER or other tools such as wundertax for instance, it is very easy to prepare and submit your tax return online.

As you’ll see, tax returns aren’t as bad as people make them out to be. The aim of our Beginners’ Guide is to get you started on your tax return today and get your money back.

Who has to file a tax return? And who can if they want to?

Most people who are employed full-time don’t have to file a tax return, particularly if they are not married. This is because their employers already pay their income tax to the tax authorities every month. Even so, submitting a voluntary tax return may still be worth their while financially. After all, it’s quite possible that you’ll receive overpaid tax back from the tax office.

Filing tax returns is mandatory for self-employed people and freelancers, just as it is for anyone who receives welfare or wage-replacement benefits (e.g. short-time allowance or parental benefits). And you’ll need to submit a tax return if you’ve switched employers in the past year or have monthly income of more than €410 in addition to your main job.

Deadlines: When do I need to file my tax return by?

The deadline depends on whether your tax return is voluntary or mandatory.

Deadlines for filing tax returns for 2023

Since 2019, the deadline for submitting mandatory income tax returns has usually been July 31st of the following year. However, there were some exceptions to this. The effects of the pandemic meant that the deadline for fiscal year 2021 was set at October 31st, 2022. Similarly, thanks to the Coronavirus Tax Assistance Act, the deadline for fiscal year 2022 was October 2nd, 2023. The deadline for fiscal year 2023 is September 2nd, 2024. Theoretically it is August 31, 2024, but since this is a Saturday the date moves to the following Monday.

If you prepare your tax return with the aid of a tax consultant, the Finanzamt will usually extend the deadline until the end of February of the year after the following year. Incidentally, if you realize that you won’t be able to meet a deadline, you can apply for an extension, citing your reasons.

Retroactive voluntary tax returns: what are the benefits

If you’re submitting a tax return voluntarily, you have four full years after the end of the fiscal year to do so. This means, for example, that you can wait until the end of 2024 to submit your tax return for 2020 and that you’ll have until December 31, 2027, for your 2023 submission.

Preparation: What do I need for my tax return?

• Income tax certificate for the fiscal year: The income tax certificate issued by your employer every year contains key information for your tax return. Tip: each item has a number that corresponds to the numbered fields in ELSTER.

• Tax number: Your local tax office assigns you an 11-digit tax number that is posted to your registered address.

• Tax identification number: If you register your place of residence with your local district office (Bezirksamt), you will receive your tax identification number (Steueridentifikationsnummer).

Freelancers must submit a verifiable list of all income and expenditure. Thankfully, there’s no need to submit the supporting documentation itself, but you are required to keep it in a safe place for 10 years.

Submitting tax returns: electronically or on paper?

Employed people are free to decide whether to submit their tax return on paper forms or electronically. For instance, you can use the free, web-based German tax software ELSTER to prepare your tax return online and send it to the Finanzamt.

By contrast, self-employed people have to submit their tax returns to the Finanzamt electronically.

Apart from ELSTER, there are also other German tax software and apps (such as WISO Steuersparbuch, Steuerbot, Wundertax or Taxfix) that can walk you step by step through the process. They will provide you with lots of useful tips for minimizing your tax bill, carry out plausibility checks to prevent errors and use an ELSTER interface to submit the finished tax return. Needless to say, you can also hire a tax consultant to do all of this for you. Professional assistance is also available from income tax assistance associations, i.e. non-profit organizations that provide tax advice and financial consulting for a fair fee.

How to get (even more) money back

Nine out of ten taxpayers get money back because they’re able to offset diverse expenditure against tax (e.g. specialist literature, work computer, relocation for professional reasons, further education and training, or retirement planning).

• Charity donations, membership fees and similar expenditure can all be offset to reduce the amount of income tax you pay. You enter these in the form called Sonderausgaben (Special Expenses).

• Have you moved? If the move was for work-related reasons or if the commute to work is shortened as a result, you can claim the costs of a moving company or estate agent for tax purposes. You enter these costs in Annex N under "Other income-related expenses".

• You can also offset any household expenses you might have under Haushaltsnahe Dienstleistungen (Household-Related Services). These include, for example, house-cleaning or gardening services.

• Insurance costs also reduce the amount of income tax you will have to pay. These can be entered in different places. Basic health insurance cover or specific private insurance such as occupational disability insurance comes under the form called Vorsorgeaufwand (Pension Expenses).

• You can also offset the costs you incur when travelling to work – even if you cycle there. Use the Anlage Nform for this – travel costs are included under income-related expenses. By the way, you can also offset bank account charges as part of your income-related expenses – albeit just a lump sum of €16.

It can be especially worthwhile submitting your tax return later if you stand to receive interest from the Finanzamt in addition to your tax refund. You can also refuse to accept the tax assessment you are sent if it varies greatly from the tax return you submitted. In this case, you have to file an objection within the space of one month.

And if you’re one of those people who have never submitted a tax return, just remember that there’s a first time for everything! Once you’ve decided to take the plunge, you’ll soon realize that it’s well worth your while.

Disclaimer: This article was written with loving attention to detail and extensive research but does not claim to be exhaustive. If you are in any doubt, particularly when dealing with more complex cases, please consult a professional tax advisor.

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