Do social benefits have to be stated in the tax return? (Sozialersatzleistungen - Hartz IV, ALG I, ALG II)

Required information for the tax return

Many social benefits (Sozialersatzleistungen) must be stated in the income tax return (Steuererklärung). The reason for this is that some payments are subject to proviso safeguarding progression (Progressionsvorbehalt). The proviso safeguarding progression means that income such as unemployment benefits or the parental allowance (Arbeitslosen- or Elterngeld) is used to determine the tax rate (Steuerlast) without being taxed. In principle, they are always tax-free.

It may be that the tax burden (Steuerlast) on the remaining income increases, because the benefits are still taken into account. This is also associated with the fact that social service recipients (Sozialleistungsempfänger) are usually required to file a tax return.

The proviso safeguarding progression (Progressionsvorbehalt) is subject to:

• ALG 1
• Kurzarbeitergeld
• Mutterschaftsgeld
• Elterngeld
• Insolvenzgeld
• Unterhaltsgeld als Zuschuss
• Krankengeld

What is Hartz IV (Arbeitslosengeld II)?

The situation looks different with unemployment benefits II (Arbeitslosengeld II), better known as “Hartz IV”, the situation looks different. “Hartz IV” is a pure social benefit (Sozialleistung) and is not subject to the proviso safeguarding progression (Progressionsvorbehalt). Consequently, the salary must not be specified as well in the tax return.

Only the period in which the benefit was obtained should be stated in the income tax return. If necessary, the tax office (Finanzamt) can require that you provide the corresponding proof.

Special case: “Hartz IV” recipient receives repayment (Steuerrückerstattung)

Possible tax refunds (Steuerrückerstattung) can be credited against income. If the reimbursement is so high that the recipient would no longer be entitled to ALG II (Hartz IV), the reimbursement will be remitted in equal installments over a period of six months.

Further information

• The time of the refund on the account is crucial, not when the tax assessment notice (Steuerbescheid) was received.
• It is best not to claim a tax refund during the period you receive benefits (as long as it can be influenced)
• If the tax refund is in the month before the beginning of receiving the benefits (Sozialleistung), then subsequent crediting takes place according to the regulations for crediting assets and not according to the regulations on income