Filing your tax return in Germany can sometimes be overlooked or delayed for various reasons. However, German tax law allows individuals to submit their tax returns retroactively under certain conditions.
If you are not legally required to file an income tax return (i.e., you are filing voluntarily), there is an opportunity to submit your tax returns for previous years without penalties
If you should have declared your cryptocurrency taxes but have failed to do so you may also avoid penalties depending on the delay and the reason for your omission, as long as you correct the error.
A retroactive submission is a valuable chance for taxpayers who may have missed out on potential refunds or for those who have not fulfilled their tax obligations in the past.
What are the consequences of Not Declaring my crypto taxes?
Failing to submit your tax return can lead to various repercussions, particularly if you are mandated to file. One of the significant consequences is the imposition of late payment surcharges. These penalties are governed by § 152 of the Fiscal Code and are designed to encourage prompt tax payments and adherence to filing deadlines.
For voluntary filers, while there may not be immediate penalties, missing the opportunity to file could mean losing out on potential tax refunds or other fiscal benefits, this includes using any crypto losses to offset future gains.
To calculate your losses you may want to use a tool like Divly that can calculate your crypto taxes for you. This way you'll know how much of a loss you can use to offset gains
Tax Return Deadlines
What is the tax deadline?
Usually the tax deadline is July 31st of the year after the one you are declaring for. However, declaring your taxes over 2023 will be different. You will have until September 2, 2024 to declare your taxes. Your 2024 and 2025 declarations will however have the standard July 31st deadline. If you are late with your declaration you may have to pay fines.
How long can I correct my tax return for?
If you're not required to file a tax return, the German tax system provides you with a four-year period to submit your return. This means you have the opportunity to look back at the past four years and decide if filing a tax return could be financially beneficial for you.
For instance, the tax return for the year 2023 can be filed as late as December 31, 2027. This extended period offers flexibility and allows you to potentially reclaim overpaid taxes.
Extended Deadlines with Tax Consultancy
If you are using a tax consultancy or are a member of an income tax assistance association, there's an additional extension available for the year 2023. Instead of the standard deadlines, your tax return can be filed by April 30, 2026. This extended deadline provides ample time to gather necessary documentation and seek professional advice to optimize your tax return.
Can I extend my tax return deadline?
What if you find yourself unable to meet the tax filing deadline? The tax system does provide an avenue for requesting an extension, but this is not granted automatically. To extend the deadline, you must have a valid and compelling reason. This could include prolonged illness or other significant personal disruptions.
When you apply for an extension, your past compliance history will be taken into consideration. The tax office will look at factors such as your punctuality in previous years and whether there's a financial benefit to you filing late. A credible explanation for the delay is crucial; without it, the chances of receiving an extension are slim.
Late Payment Penalties
What penalties can I expect for a late declaration?
The German tax system imposes strict penalties for late submissions to encourage prompt and accurate tax reporting. According to § 152 of the Fiscal Code, if you submit your tax return 18 months after the tax deadline then the tax office will categorically impose a late payment penalty.
However, the system also allows for flexibility in certain situations. If your submission is late, but within 17 months after the tax deadline, the imposition of a late payment penalty is at the discretion of the tax officer handling your case. This means that the officer has the authority to decide whether or not to impose the penalty based on the specifics of your situation.
If you have a reasonable excuse for why you were unable to declare then this would help your case.
How do I calculate my fees for my late declaration?
The calculation of the late payment surcharge begins with the assessment of your income tax. This amount becomes the foundation for determining the late fee. Key to this calculation is the difference between your assessed income tax and any advance payments or tax deductions you're entitled to.
The actual surcharge is calculated at a rate of 0.25% of the aforementioned difference per month. However, there is a minimum charge to keep in mind: irrespective of the calculated percentage, the minimum fee charged per month is 25 euros.
While these fees can accumulate, there is a ceiling to consider. The late payment surcharge is capped at a maximum of 25,000 euros. This cap is an important factor for those who might face substantial delays in filing.
Let's consider an example for clarity:
Assessed Income Tax: 10,000 euros
Advance Payments and Tax Deductions: 7,000 euros
Difference: 3,000 euros
Monthly Late Fee: 0.25% of 3,000 euros = 7.50 euros (since this is below the minimum, the charge would be 25 euros per month)
If the delay is 3 months, the total surcharge would be 25 euros x 3 = 75 euros.
It's important to note that this calculation serves as a general guideline. The actual calculation may vary based on individual circumstances and specific details of each case.
Risks of Non-Compliance
What are the fines for not amending my tax return if I have to?
One of the critical aspects of tax compliance involves amending incorrect tax declarations. If you receive a reminder from the tax authorities (Finanzamt) about any discrepancies or unfulfilled tax obligations and choose not to amend your tax declaration, it can lead to serious financial penalties. The fines for such non-compliance can range from a few hundred euros to as much as 25,000 euros, depending on the severity and nature of the oversight.
In the realm of tax compliance, one of the gravest offenses is tax evasion. This can occur in various forms, such as failing to declare additional income (e.g., income from side jobs, staking, or mining) that exceeds the exemption limit. For many employees, earning extra income outside their primary job has become common, but it's imperative to understand that this income must be declared in the tax return. The exemption limit for such income, like staking and mining, is 250 euros; any amount exceeding this threshold is subject to declaration.
If you discover a mistake in your tax return and report it to the Finanzamt, you may avoid harsher punishments. However, if the tax authorities uncover an error that results in a financial advantage to you, it may be classified as tax evasion.
The penalties for tax evasion are substantial and escalate with the amount of tax evaded:
For tax evasion involving less than 50,000 euros, the penalties typically include a fine, repayment of the evaded taxes, and an interest charge of 6% on the evaded amount.
If the amount exceeds 50,000 euros, the consequences become more severe, potentially leading to a prison sentence or a hefty fine.
In cases where the evaded tax amount is above 100,000 euros, the law stipulates more stringent penalties, including the possibility of up to 5 years of imprisonment.
Why should I declare my crypto losses for previous years?
You can take advantage of your ability to correct previous declarations by reporting your crypto losses. You can carry losses forward up to seven years, and use these to offset any gains made.
To figure out your losses, you might consider using a tool like Divly to calculate your crypto taxes. This will help you understand the amount of loss you can apply to offset any gains.
How do I fix errors in my tax declaration?
Discovering an error in your tax return can be unsettling, but addressing it proactively is crucial for compliance with tax laws. If you notice a mistake after submitting your return, it's your responsibility to report it to the Finanzamt (tax office) as soon as possible.
Identifying Errors: Errors can range from simple miscalculations to omitting income sources such as your cryptocurrency trading income, staking or mining income.
Initiating Correction: Once you've identified an error, contact your local Finanzamt. Explain the mistake and express your intent to correct it. The tax office will typically provide guidance on the next steps and set a deadline for submitting the corrected return.
Correcting a tax return involves submitting revised information that accurately reflects your financial status for the tax year.
Amending the Return: Use the same method (e.g., ELSTER, (TaxFix)[https://taxfix.de], paper form) that you used for the original submission. Ensure all changes are clearly indicated and supported with necessary documentation.
Documentation: Include any relevant documents that support your correction. This might involve revised income statements, proof of tax deductions, or other financial records.
Any tax-related information provided by us is not tax advice, financial advice, accounting advice, or legal advice and cannot be used by you or any other party for the purpose of avoiding tax penalties. You should seek the advice of a tax professional regarding your particular circumstances. We make no claims, promises, or warranties about the accuracy of the information provided herein. Everything included herein is our opinion and not a statement of fact.