Over the past few days, we have received inquiries about the effects of the coronavirus pandemic on taxes and tax returns. With this in mind, we would like to give you an overview of today's most important topics, which you may also find of interest.
Most importantly: Nothing changes regarding the submission of your 2019 tax return except for example, the opening hours and the availability of your local tax office. For the submission of the tax return in the coming year 2020, there are already some topics to consider that could save money. However, receiving short-time work benefits also means that you have to submit your tax return - even if this was previously voluntary.
Opening hours and availability of tax offices due to the coronavirus pandemic
According to press releases from the state ministries of finance and economics, the tax offices are generally closed until further notice. Nevertheless, the service remains guaranteed during this time. The tax authorities ask you to switch to alternative forms of contact (e.g. telephone, postal communication, email). Nevertheless, some tax offices still continue to grant personal appointments.
The tax authorities ask to generally avoid all unnecessary contacts (for example questions about the status of the tax return) to have more time for processing emergency relief programs and liquidity assistance for taxpayers. You can find the various contact options for your local tax office here.
Delays in the preparation of tax assessments due to Covid-19
We would also like to point out, that the coronavirus pandemic may lead to significant delays in the return of tax returns - at least for 2019.
For example, the Baden-Württemberg tax administration has announced that the processing of declarations was planned to start in early April 2020, but that there will probably be further delays. The reasons for this are reduced staffing, people needing to work from home and prioritizing the examination of applications for liquidity aid. The same announcements have been issued by the State Central Office in Lower Saxony.
The tax authorities ask you to refrain from inquiries in this regard (especially by telephone) and only contact your responsible tax office in important and particularly urgent cases, as this does not accelerate the response and only results in further processing delays.
Warning: The receipt of short-time working benefits generally means that you are required to submit your tax return
Please note, that if you receive short-time working benefits (Kurzarbeitergeld) of more than 410.- Euro, you will be required to submit an income tax return in the following year.
Are the short-time working benefits (Kurzarbeitergeld) tax-free?
The Covid-19 pandemic is already having a serious impact on our economy and more and more companies are having to report short-time work. The consequence is that an increasing number of workers will be affected.
In principle, the receipt of short-time work benefits as a wage replacement benefit is tax-free (§ 3 (2) Income Tax Act - EStG). However, it should be noted that short-time work benefits must be stated in the tax return, as this is subject to the so-called progression reservation. This means that short-time work benefits are not taxed but are included in the basis for setting the tax rate. This increased tax rate is then applied to taxable income without short-time work benefits. Because the higher tax rate is only applied in the income tax return and not already in the wage tax deduction by the employer, this can lead to an additional tax payment.
Legislators also want to provide parents with additional relief during the corona pandemic. Instead of the usual 60% short-time working benefits (Kurzarbeitergeld), parents get an increased amount of 67% of the net wage. For this, it is essential that the child(ren) are declared in the electronic income tax deduction features (ELStAM) so that the tax authorities know your status. This allowance can apply to children up to the age of 25, as long as the children are in training, studying or in a voluntary social year (FSJ). If you have not yet declared a child in your tax form, please contact your local tax office.
Mitigate loss of earnings, increase short-time working benefits with additional earnings from a mini-job
More and more employees are personally affected by reduced working hours. Many questions arise as to how and whether the individual can increase his/her reduced salary in other ways or how this affects the amount of short-time working benefits (Kurzarbeitergeld).
This is possible, for example, if you take a mini-job (or marginal employment of up to 450.- Euro) in a systemically relevant profession and thus secure an additional tax-free income.
Whether this mini-job is counted towards the calculation of short-time working benefits depends on whether the mini-job existed before the start of the short-time work or not. Since the beginning of April, assessments will also take into account whether this is practiced in a systemically relevant profession or not.
Simply put, a mini-job does not affect the calculation of short-time working benefits (Kurzarbeitergeld) if this job was started before the short-time work started. The scenario appears different if a new mini-job is only started whilst the reduced working hours were already in place. In this case, the mini-job salary is deducted from the short-time working benefits. The mini-job salary is deducted from the calculation basis for short-time working benefits (i.e. the previous net salary). There is now an exception for systemically relevant professions. The only requirement here is that the short-time working benefits and the new mini-job combined do not add up to more than the previously received net income.
It is also important to know that the income limit for a mini-job of 450.- Euro can be exceeded up to five times in the period from March 1st, 2020, to October 31st, 2020. Finally, the only question that remains is what is considered a systemically relevant profession. Even if this is handled slightly differently in each federal state, at least the following occupations are systemically relevant in the coronavirus crisis:
• Traditional professions in the health sector (doctors, nurses, paramedics) • Police, fire brigade, civil protection personnel • Employees in supermarkets and pharmacies • Harvesters in agriculture • Employees in child, youth and disability aid • Certain positions in the state, judiciary and administration • Employees at waste disposal companies, electricity and waterworks, petrol stations • Public transport employees
Business costs through homeworking because of Covid-19
In principle, expenses for a home office were previously only deductible as a business expense as part of the tax return in exceptional cases. The sudden coronavirus crisis requires short-term action and pragmatic solutions from everyone involved. In this sense, many employees also use their own equipment to be able to work from home during the arranged home office. In some cases, private devices are also purchased specifically for this purpose.
In principle, private devices that are used for work can also be claimed as advertising costs in the income tax return. Devices that didn't cost more than 952.- Euro can be written off directly, while more expensive devices have to be written off over the expected useful life (e.g. for computers over three years, for smartphones over five years). If you want to avoid elaborate proof of how often you have used your private device, you can also claim a 50% lump sum of the depreciation costs.
The same applies to the private telephone and internet line. Anyone who uses the internet or makes calls on the phone in the home office can regularly deduct 20% of the costs up to a maximum of 20.- Euro in the income tax return without needing to submit further proof. Of course, higher costs can also be deducted with evidence. For this, however, it is essential to keep the relevant evidence (e.g. invoices) for the period of the prescribed home office.
Example: A privately purchased laptop for 1,260.- Euro is used for three months during the coronavirus pandemic. If the depreciation period of 36 months is taken into account, this means that 35.- Euro per month can be applied. Without further proof, the tax office generally accepts 50%, which, in our example, would amount to business costs of 42.50 Euro.
Home office costs as a business expense
In principle, expenses for a home office were previously only deductible as a business expense as part of the tax return as an exception. The question will be whether the coronavirus pandemic has made the home office the focus of all business and professional activity and will play a completely different role in filing the 2020 tax return next year.
All people who had previously had contact with a demonstrably infected Covid-19 patient have been at home in quarantine for at least two weeks since the beginning of March 2020. At the same time, many employers advised their employees to work from home from mid-March at the latest. Many employees have also been forced to bring work and childcare under one roof through the closure of kindergartens, crèches and schools, as it were by decree of the state governments, and in most cases, this can only be done from home.
The Federal Government has also called for social contact to be avoided as far as possible and to work from home in the home office. The prescribed goal of all measures is to slow down the shutdown of the coronavirus.
If, due to the situation mentioned above, a private workspace is now converted into a professionally used office and the employee works from home due to quarantine, order from the employer, childcare needs or administration, the requirements for the deductibility of a home workspace (no other workspace available) during the corona pandemic might be met. As a result, tax recognition of the home office that is not possible outside of the coronavirus period seems conceivable. The workspace must be an enclosed space that is used almost exclusively for professional purposes. For example, working at the kitchen table or the work corner in the living room is not sufficient to assert the claims. However, the question of the deductibility of such expenses will only be finally clarified in the context of the individual assessment of the tax return.
While the self-employed photographer without another office may use his workspace as the focus of his professional work and can therefore deduct all costs, a sales representative can only claim the domestic workspace up to an annual contribution of 1,250.- Euro, as he does a significant part of the work outside his home.
Temporary support of the health system by doctors and nurses during parental leave or retirement
The coronavirus pandemic is challenging our healthcare system. For this reason, pensioners or pausing employees in the medical professions (i.e. doctors and nurses) were called upon to support the healthcare system with their experience and workforce. To a certain extent, as a thank you for their services, the legislature grants these groups of people the opportunity to claim income from this activity for tax exempt.
It is important to understand that medical and nursing care for sick people is considered to be an essential activity, for which the so-called trainer allowance (§ 3 (25) Income Tax Act - EStG) is applied tax-free up to an amount of 2,400.- Euro per year. However, certain conditions apply, such as no more than 14 hours are worked per week or that the principal is the health department, a state hospital or a non-profit organization.
Let's stick together - we can do it!
We hope that we were able to answer the most important questions about tax returns and the coronavirus. We will continue to strive in the coming days to provide further current and related topics in this tax tips section, so check back regularly for an update!
The corona pandemic has put our county in a state of emergency that was previously not considered possible. Daily life has been shot down on all levels. We all had to reorganize ourselves completely and everyone is called upon to do everything possible to protect family and society from being infected. At the same time, and this is also an enormous challenge, economic activities and our day-to-day work have to be maintained in compliance with official restrictions. But that is nothing given the large number of people who make sure that our infrastructure is maintained every day.
We would like to take this opportunity to send a big thank you again to all nurses, doctors, firefighters, police officers, cashiers in the supermarkets, delivery personnel and in general to everyone who helps to get through these challenging times. It wouldn't work without you.
Stay at home, stay healthy and file your tax return for 2019 (if you haven't already) and secure an average repayment of 1,007.- Euro.