Income Tax Statements: Everything You Need to Know!

As an employee, you receive a monthly pay slip (Gehaltsabrechnung) containing information about your salary, wage tax (Lohnsteuer), solidarity surcharges (Solidaritätszuschlag), church tax (Kirchensteuer), and social security contributions. In addition, you’ll receive an electronic income tax statement (Lohnsteuerbescheinigung) once per year which sums up all this information.

According to §93 Paragraph 1 of the German tax code (Abgabenordnung), your employer must transmit your electronic income tax statement to the necessary tax authorities (Finanzbehörde) at the end of the calendar year (at the absolute latest by the last day of February in the following year) and provide you with a printed version. To authenticate this statement, they must apply for a certificate through the Elster online portal.

Note: If you terminate employment within the calendar year, you will receive your income tax statement earlier and if you were employed by multiple companies throughout the year, you will receive multiple income tax statements.

Every year, the Federal Ministry of Finance (BMF) publishes the guidelines that determine how wage data must be submitted. Employers use these guidelines to:

  • Register and pay your wage tax to the tax office (Finanzamt)
  • Transmit and print out your yearly income tax statement

Provide special wage tax certificates without automatic payroll accounting (for employees who work in an employer’s private household with a marginal employment relationship)

Why do I need an income tax statement?

Your income tax statement is the basis for your income tax return as it describes how much wage tax you’ve paid in the past calendar year and for what reasons. Your employer has the responsibility of deducting your income tax correctly and transferring your wage data to the tax authorities (Finanverwaltung).

If you choose to submit your tax return electronically, for example by using the convenient and simple tax tool from Wundertax, you can simply transfer the data from your income tax statement into the appropriate fields.

Please note that if you choose to submit your tax return the more “traditional” way with paper tax forms, it is unnecessary to submit your income tax statement along with your tax return – the tax office already has access to this data from your employer. Before 2019, one was required to transfer the data from their income tax statement onto Form N (Anlage N) of their tax return, but the tax authorities have since waived this requirement – Form N can now be used to focus on income-related expenses (Werbungskosten) such as commuter expenses, work equipment, second households, and days spent working remotely.

Social security contributions should be entered into the Provident Expenses Form (Anlage Vorsorgeaufwand) as they are considered special expenses (Sonderausgaben) and reduce your taxable income.

Tax ID and eTIN

In 2008, the Federal Central Tax Office (BZSt) began issuing all residents of Germany with a tax identification number (tax ID) which is typically received after birth and is valid for life. Tax IDs are used to simplify communication in all tax matters. This number is also used when your employer submits your electronic income tax statement to the tax office.

When electronic tax returns were introduced, eTINs (electronic transfer identification numbers) were created as another form of sorting and identifying your tax data in the case that your employer doesn’t have your tax ID on hand. This number can only be used until 2022 when it will be completely replaced by tax IDs.

To properly allocate your information, your local tax office needs either your tax ID or eTIN. These numbers can be found in the top left-hand corner of your income tax statement or your previous tax assessment notice (Steuerbescheid).

Your 2020 income tax statement

Section 31b of the Income Tax Act (EStG) regulates the information that must be included in your income tax statement and the guidelines for 2020 can be found here (in German).

In the left column of the statement, next to your employer’s address and tax number, you will find your wage tax deduction details (Lohnsteuerabzugsmerkmale), ELStAM for short. These details are stored at the Federal Central Tax Office (Bundeszentralamt für Steuern) and determine the tax amount that is deducted from your income. In 2013, ELStAM replaced paper income tax statements which lead to the name “electronic income tax statement.” The details listed include your:

  • Name, address, and birthday
  • Tax ID
  • eTIN
  • Personnel number
  • Tax class
  • Number of child allowances
  • Church tax details
  • Yearly tax-free allowance (if you applied for allowances for your wage tax deductions)
  • Yearly additional income (e.g. if you have several low-paying jobs at the same time)

In the right column you will find more information, including:

  • Duration of employment
  • Periods without wages (e.g. parental leave, unpaid leave for at least 5 consecutive working days)
  • Taxable gross wages (including taxable benefits in kind)
  • Withheld wage tax, church tax, solidarity surcharges
  • Contributions to statutory pension insurance and professional pension schemes (Rente)
  • Benefits related to pensions (e.g. retirement pension or widow’s/widower’s allowances)
  • Contributions to statutory or private health insurance (Krankenversicherung)
  • Contributions to nursing care insurance
  • Contributions to unemployment insurance (Arbeitslosengeld)
  • (Seasonal) short-term work benefits (Kurzarbeitergeld), maternity benefits (Mutterschaftsgeld), compensation for loss of earnings in accordance with the Infection Protection Act, tax-free top-up amounts, supplements for partial retirement, and tax-free supplements that your employer has provided on top of short-term work benefits.
  • Tax-free employer benefits (e.g. tax-free allowances for travel expenses or relocation costs in the case of a second household)
  • Severance packages (Abfindungen) or bonuses for several years of service – whether they are taxed at once or according to the One-Fifth Method (Fünftelregelung)

Tax Tip: You can still apply for your severance package to be taxed according to the one-fifth method on your tax return!

Under number 2 of your income tax statement, certain conditions will be denoted with capital letters:

  • Capital letter F: Tax-free transportation to your first workplace
  • Capital letter S: Your employer has calculated the wage tax on a miscellaneous payment (e.g. a Christmas bonus) and hasn’t included the wages from previous employments in the same calendar year
  • Capital letter M: If you were provided with meals while working away from home/in a second household, these meals are assessed as benefits in kind
  • Capital letters FR: If you are a cross-border commuter who lives in France but works in Germany (e.g. FR2 for employers based in Rhineland-Palatinate)

Number 15 on your income tax statement is especially important nowadays as short-term work (Kurzarbeit) has been more prominent due to Corona: Your employer must list the amount of short-term benefits and awarded supplements here as these benefits are subject to the so-called Progressionsvorbehalt. This also affects other wage replacement benefits (Lohnersatzleistungen) listed under number 15.

Certain information on your income tax statement indicates whether you are required to file a tax return. For example: if the capital letter S has been entered, if you received a severance package taxed according to the one-fifth method, or if you and your spouse have chosen tax classes 3 and 5.

You can find more detailed information on mandatory tax assessment in this article.

Should I hang on to my income tax statements?

We recommend that you keep your income tax statements up until you retire. If your pension calculation happens to contain errors, your income tax statements prove the dates and amount of your wages – this is especially useful if you don’t have social security reports for your entire career. It is best to store all of these documents together along with your tax assessment notice of each calendar year.

Did you receive your income tax statement? File your tax return now!