Breaking the Myths: Tax Returns in Germany and the Risks of False Information

For some filing a tax return (Steuererklärung) in Germany can seem complex, bombed up several decision to make, especially with all the myths surrounding it. Some believe that filing is unnecessary, while others think they can easily manipulate figures to get a higher refund without consequences. In this blog, we will debunk common myths and clarify the legal risks of providing false information.

Common Myths About Tax Returns

1. “I don’t need to file a tax return”

While it’s true that many employees in Germany are not required to file a tax return, there are exceptions:

• If you have more than one source of income

• If you receive benefits such as unemployment or parental allowance exceeding €410

• If you claim tax-deductible expenses like work-related costs (Werbungskosten) exceeding €1,230 (as of 2023)

• If you are married and choose a combination of tax classes III/V

Even if not mandatory, filing a tax return can often lead to a refund, making it worthwhile.

2. “I can claim anything as a deduction, and the Finanzamt won’t check”

Many believe they can include exaggerated expenses in their tax return without verification. However, the German tax office (Finanzamt) conducts random audits and requests supporting documents. If discrepancies are found, penalties may follow.

3. “The tax software automatically ensures I get the best refund”

While software like Taxfix, SteuerGo, and Elster can simplify the process, they rely on the accuracy of the data you input. Misinterpretation of categories or incorrect deductions can lead to issues with the Finanzamt.

4. “I don’t need receipts for small expenses”

Even if some tax-deductible expenses are covered by lump sums, the Finanzamt may still request proof if your total claim is high or appears suspicious.

The Legal Consequences of False Information

Providing false information in your tax return is considered tax fraud (Steuerhinterziehung) under German law. Here are the potential consequences:

1. Fines and Penalties

   If the Finanzamt detects an error, they may impose fines. For minor mistakes, you might only need to pay the additional tax owed plus interest. However, deliberate fraud can lead to heavy penalties.

2. Visa and Residency Implications: For foreign employees, tax fraud could jeopardize your visa or residency status, potentially leading to deportation.

3. Criminal Charges

   If you knowingly submit false information, you could face criminal charges. The German Tax Code (§ 370 AO) outlines penalties for tax fraud, which can include:

   • Fines up to €50,000 for serious offenses

   • Imprisonment (in extreme cases where fraud exceeds €100,000)

4. Backdated Audits and Interest Payments

   The Finanzamt has the right to audit your returns from the past 10 years if fraud is suspected. If errors are found, you must repay the incorrect refund with added interest (6% per year).

How to Stay Safe When Filing Your Tax Return

1. Be Honest and Accurate: Only claim deductions that you can justify with receipts or valid documentation.

2. Keep Records: Maintain all tax-related documents for at least 10 years, as audits can be retrospective.

3. Seek Professional Help: If unsure, consult a tax advisor (Steuerberater) or use reputable tax software.

4. Report Mistakes Immediately: If you realize you made an error, voluntarily correcting it can reduce penalties (Selbstanzeige).

Conclusion

Filing a tax return in Germany is an opportunity to get back what you’re owed, but it must be done correctly. Myths about effortless deductions and avoiding scrutiny can lead to serious consequences. Stay informed, keep records, and if in doubt, seek professional advice to ensure a stress-free tax season.