Tax season can be a daunting time of the year for many, but it doesn’t have to be. Understanding tax returns, who needs to submit them, who can do it voluntarily, and how to navigate the process with the right tools is essential. In this comprehensive guide, we’ll delve into the world of tax returns in Germany, covering everything from the basics to advanced strategies. We’ll also provide insights on obtaining tax identification numbers for employees. So, whether you’re a taxpayer, an expatriate, or an employer in Germany, this article will equip you with the knowledge you need.

• Understanding Tax Returns
  • What Are Tax Returns?
• Contents of a Tax return (Steuererklärung) in Germany
  • Personal Information
  • Income and Earnings
  • Deductions and Allowances
  • Tax Credits and Rebates
  • Capital Gains and Losses
  • Tax Payments and Refunds
  • Special Considerations for Non-Residents
• Who Needs to Submit a Tax Return?
  • Mandatory Tax Return Filing
  • Voluntary Tax Return Filing
• Different ways to submit a tax return
  • Manual Form Submission
  • Elster (Elektronische Steuererklärung)
  • Other Tax Tools
    • Benefits of Using Tax Tools
  • Professional Assistance
  • Alternative Methods
  • Why Are Tax Returns Important?
• Tips for a Smooth Tax Return Process
• Conclusion

Understanding Tax Returns

What Are Tax Returns?

A tax return is a financial document that provides information about an individual’s or business’s income, deductions, and tax liabilities. In Germany, a tax return is called “Steuererklärung.” The purpose of a tax return is to calculate the amount of income tax that a taxpayer owes or is owed by the government. The most common categories of people who needs to submit their tax returns are Employees, Freelancers, Pensioners, Self employees, Students etc.,. Tax returns help the government determine if taxpayers have paid the correct amount of taxes throughout the year.

Contents of a Tax return (Steuererklärung) in Germany

The German tax return is a comprehensive document that captures various aspects of an individual’s financial activities. It’s typically due by the end of July of the following year. However, extensions are possible upon request.

Personal Information

This section includes basic personal details such as name, address, marital status, and tax identification number (Steueridentifikationsnummer).

Income and Earnings

• Employment Income: Details of income from employment, including salaries, wages, bonuses, and benefits.
• Self-Employment Income: Profits and losses from self-employment, freelance work, or business activities.
• Investment Income: Dividends, interest, capital gains, and rental income.
• Pensions and Annuities: Details about retirement income.
• Other Income: Any additional income sources, such as alimony or royalties.

Deductions and Allowances

• Work-Related Expenses: Costs directly related to work, like commuting, equipment, or uniforms.
• Contributions and Insurance: Contributions to health insurance, social security, and pension schemes.
• Family Allowances: Childcare costs, child allowances, and maintenance payments.
• Charitable Donations: Deductions for donations to recognized charitable organizations.
• Special Expenses: These could include expenses related to education, training, or caring for elderly family members.

Tax Credits and Rebates

• Child Allowance: A tax credit for each child.
• Income Tax Credits: Depending on circumstances, individuals might be eligible for various income tax credits, like the basic allowance or the spouse allowance.

Capital Gains and Losses

Details of gains or losses from the sale of assets like stocks, real estate, or other investments.

Tax Payments and Refunds

Information on tax already paid, either through withholding (e.g., Lohnsteuer) or estimated tax payments.

Special Considerations for Non-Residents

Non-residents earning income in Germany are subject to certain tax regulations, especially under double taxation agreements if income is earned in both Germany and their home country. The tax return for non-residents often focuses on income generated within Germany and may have specific requirements.

Who Needs to Submit a Tax Return?

Mandatory Tax Return Filing

In Germany, the obligation to file a tax return is determined by various factors, including:

• Income Level: Individuals with an annual income above a certain threshold are required to file a tax return. This threshold can change annually, so it’s crucial to stay updated.
• Self-Employed Individuals: Self-employed individuals must file a tax return, regardless of their income.
• Multiple Sources of Income: If you have income from various sources, such as employment and freelance work, you may need to file a tax return.
• Foreign Income: If you’re a resident in Germany and have income from abroad, you might be required to file a tax return.

Voluntary Tax Return Filing

Even if you’re not obligated to file a tax return, you can still choose to do so voluntarily. This can be beneficial in several ways:

• Claiming Deductions: Voluntarily filing a tax return allows you to claim deductions and potentially receive tax refunds.
• Demonstrating Income: Having a tax return on record can be useful when applying for loans or visas.
• Optimising Finances: Voluntary filing can help you better understand your financial situation and make informed decisions.

Different ways to submit a tax return

Submitting tax returns in Germany is a fundamental responsibility for residents and non-residents earning income in the country. There are several methods available for filing tax returns, catering to different preferences and needs.

Manual Form Submission

One traditional method for filing tax returns in Germany involves using paper forms. Individuals can obtain these forms from local tax offices or download them from the official website of the Federal Central Tax Office (Bundeszentralamt für Steuern). The completed forms, along with relevant documentation, are then physically submitted to the respective tax office by post or in person.

Elster (Elektronische Steuererklärung)

Elster, the electronic tax return system, is a popular and efficient way to file taxes in Germany. This online platform allows taxpayers to submit their returns electronically. Here’s how it works:

• Registration: Users need to register on the ElsterOnline portal to gain access. This typically involves providing personal details and receiving login credentials.
• Data Entry: Taxpayers can fill in their tax information directly on the platform, which provides guidance and prompts for different sections of the return.
• Submission: Once the tax return is complete, it can be securely transmitted to the tax office electronically through Elster.

Other Tax Tools

Apart from Elster, several other software tools are available for tax return submissions. These tools often simplify the process by providing user-friendly interfaces, guidance, and automatic calculations. Some popular tax software in Germany includes:

• Wundertax: A user-friendly platform that simplifies the tax filing process, catering to a wide range of tax situations.
• WISO Steuer: Known for its user-friendly interface and comprehensive support for various tax situations.
• SteuerGo: A web-based tool allowing easy data entry and submission directly to the tax office.
• Steuertipps: Offers detailed guidance and assistance in completing tax returns.
• Taxfix: Known for its mobile application, offering an intuitive interface for users to input their tax information and submit returns conveniently.

Benefits of Using Tax Tools

• Time Savings: Tax tools streamlines the tax return process, saving you valuable time.
• Accuracy: The tool reduces the risk of errors, ensuring accurate tax calculations.
• Maximized Deductions: Tax tools helps identify all eligible deductions and credits.
• Real-Time Updates: Stay up to date with changing tax laws and regulations.

Professional Assistance

For those uncomfortable with self-filing, seeking professional help from tax advisors, accountants, or tax consultants is a viable option. These experts can provide guidance, ensure accurate filings, and maximize potential deductions.

Alternative Methods

• Tax Consultants: Consulting tax professionals or accountants can streamline the process and ensure compliance with German tax laws.
• Mobile Applications: Some tax-related mobile applications offer simplified interfaces, allowing users to fill in their tax information on the go.

Why Are Tax Returns Important?

Tax returns are essential for several reasons:

• Calculation of Taxes: They help in calculating the accurate amount of taxes that a taxpayer owes or is owed.
• Tax Refunds: If you’ve overpaid your taxes, a tax return can lead to a refund.
• Tax Deductions: Tax returns enable you to claim deductions, potentially reducing your taxable income.
• Compliance: Filing tax returns is a legal requirement, and non-compliance can lead to penalties.

Tips for a Smooth Tax Return Process

• Gather all relevant financial documents, such as income statements, receipts, and investment records.
• Consider using a tax tool like wundertax to simplify the process and reduce the chance of errors.
• If your financial situation is complex, consider hiring a tax advisor or consultant for expert guidance.
• Keep abreast of changes in tax laws and regulations to ensure compliance.
• Don’t procrastinate. Ensure you submit your tax return by the deadline to avoid penalties.

Conclusion

Understanding tax returns in Germany is crucial for both residents and businesses. Whether you’re required to file a tax return or choose to do so voluntarily, having the right information and tools can make the process much smoother. Tax tools can be valuable assets in simplifying the tax return process and maximizing deductions.

Remember, staying organized, seeking professional help when needed, and meeting filing deadlines are key to a successful tax return experience. With the right knowledge and tools at your disposal, you can navigate the German tax system confidently and efficiently.