Tax return obligation for 2020 in case of short-time allowance receipt

September 28, 2021

Persons who work exclusively as employees are generally not required to file an income tax return, since income tax has already been withheld on the wage income. In individual cases, however, it may make sense to submit a tax return if, for example, income-related expenses or tax reductions for craftsmen’s services are to be claimed or wage income was only received for part of the year. A obligation to file a tax return exists, however, if tax-exempt income of more than 410€ was received, which is subject to the progression proviso. This includes, for example, unemployment, short-time worker and parental allowances. Currently, there is a reporting obligation in particular if short-time allowance of more than 410€ was received in 2020. This is shown on line 15 of the wage tax statement for 2020. Via the wage tax certificate, the tax office also has knowledge of any tax-free benefits recorded by the employer to this extent, which are subject to the progression proviso.

Recipients of such tax-exempt income are now not to be placed in a better position than employees who have continuously received wages. Although the short-time allowance itself is tax-free, it is for this reason subject to the so-called progression proviso, which means that the short-time allowance is included when determining the tax rate to be applied to the employee’s wage, which is important in view of the progressive income tax scale. By submitting the tax return, the tax office can make the correct tax calculation. In many cases, the tax assessment carried out by the tax office leads to a tax refund, because too much wage tax was withheld for the wages. However, tax arrears may also be incurred. This is particularly possible if the working hours were not reduced to zero in the months of short-time work, but were worked in part.

Recommendation for action: First of all, those affected should check whether there is a tax declaration obligation. If this is to be affirmed, it should be checked whether further income-related expenses, extraordinary burdens or e.g. costs for craftsmen’s services can be claimed for tax purposes. The result of a tax assessment (tax refund or back payment) should be estimated in good time so that the taxpayer can prepare for it. In the case of spouses, an individual assessment may also be advantageous in cases where the progression proviso applies.