The onset of the corona pandemic last year completely changed and partly limits our daily life. The Corona Tax Aid Act (Corona-Steuerhilfegesetz) and Social Protection Measures (Sozialschutz-Pakete) of the German Government financially relieve people and help safeguarding their economic existence. With the Annual Tax Act 2020 (Jahressteuergesetz 2020), the federal government likewise reacts with several fiscal reliefs upon the persistent hardships of the Covid-19 Crisis.
In the following we summarize for you, what has changed within the tax year 2020 and to which aspects you should pay attention. The better you are informed, the more taxes you can save!
If you are obliged to submit a tax return, you must submit it by 31 July of the following year. If you submit it late, you will be charged a late filing surcharge (Verspätungszuschlag). The 31.07.2021 falls on a Saturday, so the deadline is extended to the next working day. Your tax return for the 2020 tax year must therefore be received by the tax office by 2 August 2021.
Do you want to file a voluntary tax return? Then you have up to 4 years to do so. The deadline for a voluntary tax return is always 31 December, 4 years after the actual tax year. For the tax year 2020, you have time until the end of 2024. But if you file your tax return earlier, you will also find out sooner how much you will receive in tax refunds:
According to the Federal Statistical Office, the tax refund for employees voluntarily submitting a tax return is in the average 1,027 euros.
When must I file a tax return?
Did you receive short-term work benefits (Kurzarbeitergeld) of more than 410 euros in 2020? Did you get unemployment benefit I (Arbeitslosengeld I), parental or maternity benefit (Eltern- oder Mutterschaftsgeld)? These are wage-replacement benefits (Lohnersatzleistungen) forcing you to file a tax return for 2020. Wage-replacement benefits are not taxed but subjected to the so-called progression proviso (Progressionsvorbehalt). This can possibly raise your tax rate. For this reason our tax guide offers detailed information about deductible expenses. There are more than you might think!
If you pursued a taxable second occupation in 2020 or have been classified in income tax class 3/5 or 4 with a factor you are likewise forced to file a tax return. Here you can find a list of all compulsory tax assessments.
Short-term work (Kurzarbeit) and its tax consequences
Due to cyclical considerations in 2020, a lot of employees had been forced wholly or temporarily to short-term work. Therefore they are obliged to file a tax return for 2020. Employees on short-term work receive within the first three reference months 60% of the difference of their actual income and their target income. For employees with a child this rate is raised about 7% up to 67%. A reduction in working hours of at least 50% raises the short-term work benefits (Kurzarbeitergeld) starting with the fourth month to 70% (77%) and starting with the seventh month up to 80% (87%). Usually, short-term work benefits can only be drawn for 12 months. With regard to the Corona crisis the federal government has extended the possible subscription period up to 24 months, but not later than 31 December 2021.
Note: If you are still (or will be again) on short-term work in 2021, you as a spouse can increase your short-term work benefits by changing the tax class: The lowest intra-year deductions has tax class 3. More important, the tax classes 3 and 4 include a tax-free child allowance (Kinderfreibetrag). So you automatically receive 7% higher short-term work benefits for parents. Alternatively, you can request a certificate from the Agentur für Arbeit confirming your child or you give your employer a copy of the income tax card of your spouse including the tax-free child allowance. Since 1 January 2020, you can incidentally change your tax class several times a year. The change of the tax class starts with the month after the request. Don´t worry: Even if you haven´t chosen the best combination, you won´t be paying more taxes in the end: The final settlement comes with the tax return.
For some tax payers the short-term work benefits mean financial difficulties. For this reason the regulations for additional income whilst receiving short-term work benefits had been changed several times. In general, if you had a side job before receiving short-term work benefits you can keep the additional income without a shortage of your short-term work benefits. For April 2020, a side job in a system-relevant area remains untouched. Since May 2020, all other occupational activities are treated likewise.
Note: In 2021 your side job income will be counted towards your short-term work benefits. Exception: Mini-jobs are without charges till the end of 2021.
Top-up by the employer
Some employers support their employees by voluntarily topping up the short-term work benefits. Normally, these benefits have to be taxed. Due to the Corona pandemic, these top-up amounts from the employer are tax-exempt as long as, together with the short-term work benefits, they do not exceed 80% of the lost pay. This regulation applies to 2021, too.
What is the tax impact of Corona?
Home office lump sum (Home-Office-Pauschale)
The home office lump sum is a tax relief for all employees who switch to a home office due to Corona and cannot claim a tax-recognised home office (häusliches Arbeitszimmer). You can deduct a flat rate of 5 euros per home office day from your taxes. The lump sum is limited to 600 euros per year and applies for 2020 and 2021. A maximum of 120 home office days per year can therefore be claimed. The home office lump sum is included in the employee lump sum (Arbeitnehmer-Pauschbetrag) of 1,000 euros. If you incur more than 1,000 euros in income-related expenses (Werbungskosten) per year, you can deduct them by proving all items individually. With commuting allowance (Entfernungspauschale), work equipment (Arbeitsmittel), incidental expenses (Nebenkosten) and insurance contributions (Versicherungsbeiträge), etc., this is not unlikely. Just try it!
Tip: Also try to deduct costs for disinfectants and masks (e.g. FFP2 masks) as income-related expenses if you need them for work and your employer has ordered the purchase.
Corona special payment (Corona-Sonderzahlung)
To alleviate the additional burden of the Corona crisis, the legislator allows employers to make tax-free special payments to employees of up to 1,500 euros. This "Corona bonus" does not have to be listed either in the tax return or on the income tax statement (Lohnsteuerbescheinigung). It is applicable per employment contract.
- Period of agreement and payment: 1 March 2020 to 31 June 2021
- In addition to wages (regular wages may not be converted into a special payment)
- Agreement between employer and employee must designate that it is Corona-related tax-free aid
Corona: Return Journey Costs
In March and April 2020, many German travellers and business travellers were stranded abroad due to Corona. In response, the Federal Foreign Office brought 240,000 Germans back to Germany with specially chartered aircraft in an unprecedented repatriation campaign. The flat-rate personal contribution to these costs can be claimed in the 2020 tax return: Individual tourists can deduct them as extraordinary expenses (außergewöhnliche Belastungen), business travellers as income-related expenses (provided the employer did not cover the costs).
An extraordinary expense, i.e. a higher burden of expenses compared to other taxpayers with similar income and marital status, can be claimed if it is inevitable and necessary. This was the case because of the Corona-related border closures and the almost complete shutdown of air traffic worldwide. The only hurdle: The limit of the "reasonable burden" must be exceeded in order to be able to deduct the costs. This limit is determined by income, marital status and number of children.
Important: The journey must have begun before the Foreign Office has issued a travel warning for the destination. Anyone who travels to a risk area despite a travel warning is responsible for this and cannot deduct the costs.
Loss of earnings
If you were in quarantine in 2020 or could not go to work because school and kindergartens were closed and there was no other care for your child, you may have received compensation for loss of earnings (Verdienstausfallentschädigung) under the Infection Protection Act (Infektionsschutzgesetz). This wage replacement benefit (Lohnersatzleistung) is paid for a maximum of 10 weeks per parent (single parents: 20 weeks) and for children up to and including 11 years of age. This regulation is initially valid until the end of March 2021. The compensation for loss of earnings is subject to progression proviso (Progressionsvorbehalt) and obliges you to file a tax return.
Corona: Support for parents
Parents already received a one-time child bonus (Kinderbonus) totalling 300 euros per child in September and October 2020. The child bonus is part of the federal government's Corona economic stimulus programme. It is tax-free and, together with child benefit (Kindergeld), is automatically offset by the tax office against the child allowance (Kinderfreibetrag) to determine the most favourable option (child benefit and child bonus or child allowance). Families with low or medium incomes benefit most from the child bonus.
Relief amount for single parents (Entlastungsbetrag für Alleinerziehende)
Especially for single parents, the care burden in the Corona crisis is enormous. Therefore, the relief amount for single parents was increased from 1,908 euros to 4,008 euros in the Second Corona Tax Aid Act (Corona-Steuerhilfegesetz). This initially applied for the years 2020 and 2021. With the Annual Tax Act 2020 (Jahressteuergesetz 2020), this relief amount was de-funded: It now also applies beyond 2021.
Allowances and tax-free amounts increasing in 2020
The basic tax-free allowance (Grundfreibetrag) has increased for the year 2020. It exempts income up to a certain limit from tax. For singles it is 9,408 euros, for a married couple assessed together 15,540 euros. Income tax only has to be paid on higher incomes.
The child allowance (Kinderfreibetrag) has increased again in 2020. Including the allowance for educational, care and training needs (BEA), the child allowance is now 7,812 euros.
The sum of deductible contributions to old-age provision (Altersvorsorge) increases by 2% per year. In 2020, you will already be able to deduct 90% of your pension contributions.
Flat rate for moving expenses (Umzugskosten-Pauschale)
If you move for professional reasons, you can deduct the costs as income-related expenses (Werbungskosten) for tax purposes. You can cover part of the moving costs with the "lump sum for other moving costs" (Pauschale für sonstige Umzugskosten). This flat rate was changed several times in 2020: Until 29 February, it amounts to 811 euros for singles and 1,622 euros for married couples or single parents. Each child was considered with 357 euros. From 1 March to 31 May, the flat rate for singles is 820 euros and 1,639 euros for married couples or single parents. For each additional person, 361 euros are added.
As of 1 June 2020, the calculation will be reorganised: For the entitled person, a lump sum of 860 euros will be applied. For each additional person moving (spouse or partner, child, stepchild, foster child), a lump sum of 573 euros will be added. However, the flat rate for moving costs does not apply to moving costs in the case of double household - in this case the costs must be proven individually.
Save taxes now!
With the online tax return from wundertax, you can submit your tax return easily and inexpensively in just 15-20 minutes - no previous knowledge necessary! Wundertax was awarded "very good" by the TÜV for customer satisfaction. If you have any questions, our customer support will help you at any time.