Michael Schopp

Employees, Corona and the Tax Return: Those Who Receive Wage Replacement Must File a Tax Return

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Employees, Corona and the Tax Return: Those Who Receive Wage Replacement Must File a Tax Return

Christoph H. was caught stone cold by the Corona pandemic in the spring of 2020: his employer specialises in the production and distribution of advertising printed matter. In the course of the initial crisis panic, even regular customers cancelled orders en masse, and new ones didn't come in at first - as product manager, Christoph suddenly had hardly anything to do. The company reacted quickly and sent most of its employees, from the printer to the secretary to the management level, into short-time work.

Short-time allowance: a blessing for many employees

After the initial shock, Christoph coped well with the situation, he was able to work a few hours a week in his home office, and the short-time allowance was high enough to continue paying his debts easily. To be honest, he even enjoyed the extra free time he had gained.

In the course of the year, the company's order situation picked up again, so Christoph's biggest worry that his employer might have to file for insolvency quickly evaporated.

How do the short-time allowance and other Corona assistance pay off in tax terms?

Short-time allowance is tax-free - Christoph knew that. That's why it never occurred to him that he would have to file a tax return for 2020 because he received it. Normally, he is not obliged to file an investment.

 

However, this now changes with the receipt of the short-time allowance, because this belongs to the so-called wage replacement benefits - just like, for example, sickness benefit, maternity benefit, parental allowance or unemployment benefit I. The insolvency allowance, which Christoph receives in 2020, is also tax-free.

 

Insolvency benefits, which Christoph would have received if his employer had had to file for insolvency, also count as wage replacement benefits. The same applies to any compensation for loss of earnings under the Infection Protection Act, which Christoph would have received if the health authority or another competent body had sent him into quarantine or banned him from working.

Wage replacement benefits change the tax rate - that's why they belong in the tax return

All wage replacement benefits are income that is subject to the so-called progression proviso: Unlike "normal" income (i.e. wages or profits from a commercial or self-employed activity), they do not count as taxable income - but they do influence the tax rate.

 

As is well known, the tax rate in Germany is quite individual: only income that exceeds the basic tax-free amount (in 2020 it was €9,408 for single persons, €18,816 for married persons) is taxed at all. And the more you earn, the higher your personal tax rate. From an income of €270,501 (€541,002 for married persons, values for 2020), you pay a top tax rate of 45%. In addition, there may be church tax and, until now, the solidarity contribution, which will only be waived from 2021 - but again not for the top earners.

 

There is a perfectly logical reason why Christoph has to declare the wage replacement benefits he receives in his tax return: the bodies paying them do not know how much Christoph's other income was, so the total tax cannot be withheld directly, as is the case with wages.

Remember your compulsory assessment, otherwise there is a threat of additional payments!

Because Christoph did not know this, he almost unknowingly evaded taxes. The tax office does not automatically write to everyone who is obliged to pay tax this time to make them aware of this. However, since it can be assumed that the offices communicate with each other, he would have to make additional payments later.

If you too have received wage replacement benefits, be it Corona-related or for other reasons, contact us by phone (02738/6888713) or write to us so that we can resolve the matter in the best possible way for all concerned. We are also happy to accept receipts digitally on your behalf.

Airbnb-Rental: Income belongs in tax return

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steuerberatung-fuer-vermieter

Rental via Airbnb and other platforms: How to avoid heavy tax penalties

Why income from sporadic rentals should also be included in your tax return and how you can now prevent the worst by filing a voluntary disclosure

It was good business for Luke and Paul. Three years ago, Phillip had moved out of his flat share because he had finally finished his studies. But instead of looking for a new roommate, the two friends, who had already been at work for two years themselves, had a great idea: they wanted to rent the vacant room to trade fair visitors and tourists in future via the Airbnb platform. This, according to the calculation, would bring in at least double, if not triple the regular rent and provide the two residents with a nice additional income.

Income from renting via Airbnb bypasses the tax

No sooner said than done - Lukas, the main tenant of the flat, registered with Airbnb, advertised the shared room for subletting and received the first enquiries after a short time. Cool, the two of them thought and enjoyed the little extra prosperity they gained from the temporary rental. Around 1,200 euros per month in rental income came in this way. Lukas and Paul shared it among themselves. Life was good. Too nice for such dry topics as taxes from renting and leasing. Or to put it another way: no tax office ever found out about this rental income.

Überbrückungshilfe Übernahme von Fixkosten

Severe penalties for tax evasion

They should have been included in the tax return. This is because income from the rental of real estate - even if it is only a single room, which is occasionally rented through Airbnb - must be declared.

At least if the income exceeds 520 euros per year and the total income of the landlord is higher than the basic allowance (2020: 9,408 euros for singles). Rental income is regulated in § 21 EStG "Income from letting and leasing", and this also includes the short-term letting of holiday flats or rooms. If a landlord conceals such income, he evades taxes and cannot plead ignorance. There are serious consequences. Back payments, interest and late payment surcharges are the lesser evil. Much worse are high fines or even up to five, in particularly serious cases up to ten years in prison.

Success for tax investigators: Airbnb must provide insight

But Lukas and Paul, as well as many other Airbnb landlords who do not declare their rental income in their tax returns, have not had much to fear so far. It was to their advantage that the Irish-based rental platform has so far seen no reason to allow German tax authorities to view their client data. It is true that the company states on its website that "income received as a host on Airbnb is considered taxable income which may be subject to various taxes such as rental tax, income tax or VAT". However, Airbnb understandably does not have a strong interest in ensuring that landlords also remember their tax liability. And certainly not to disclose customer data. A paradise for tax evaders. Hamburg tax investigators did not let up, however, and were finally successful. A court in Ireland has now ruled in the last instance that Airbnb must provide information.

Preventing penalties for tax evasion through voluntary disclosure

So now things could be close for Luke and Paul. Because with this judgement the time of carelessness of Airbnb landlords who do not tax their income from rentals is "unfortunately" over. The tax authorities will now evaluate the material from Airbnb. However, it still has to be distributed by the Hamburg tax investigators to the individual federal states and tax investigations, leaving a certain amount of time to prevent the worst consequences of tax evasion. But this can only be done by means of a self-denunciation in which all (!) previously undeclared income (not only that from renting and leasing) is listed in full. Whoever tricks here and leaves something out will be fined despite the self-denunciation.

Act quickly to avoid penalties

Timing is also important. Because only those who

1. has not yet received an order for an external audit OR

2. could not assume that the tax evasion would be discovered

The mere control material does not automatically lead to the assumption that evasion is detected. So just because a landlord has learned that the tax authorities have gained insight, he does not have to assume that they will notice his tax evasion. In this respect, he can still go unpunished in the event of a self-denunciation even with this knowledge. Nevertheless, in view of the first point, speed is of the essence. The tax offices will soon receive control material from the tax investigation department. And at the latest when the question about the rental income is in the letterbox, a self-denunciation is no longer possible.

Corrected tax returns, back payments and interest

A voluntary disclosure can protect against penalties, but not against back payments and interest. All taxes on the income earned so far must be paid in arrears in any case. And interest is also due on the back payment, currently at a rate of six percent per year. However, the interest always starts on 30 March of the following year. So for income tax 2018, which had to be declared in 2019, the interest run began on 30 March 2020.

The following back payments and interest would be due for Luke and Paul:

Additional payment for undeclared income from AirBnB

If the tax office suspects tax evasion, it may change the assessment notices up to ten years retroactively. If, for example, the income from 2014 is subsequently taxed and the amended assessment arrives at the landlord in October 2020, a further 27 percent interest is due on the additional payment. If no tax return is submitted at all, the tax can still be assessed 14 years after the end of the calendar year in question.

Act now and disclose income from letting. We can help you!

By filing a self-disclosure, you can avoid the authorities. Do not take any risks in the hope of not being discovered. It's better to put your cards on the table and declare all income - both from renting through Airbnb and any other income that may have fallen by the wayside in the past. We will help you to make sure that everything is in order and that you don't forget anything. My team and I will fully investigate your income and assist you in making your corrected declaration.

Other platforms also affected

Moreover, the scheme does not only apply to income from Airbnb subleases. It can be assumed that the tax authorities will now also request data from other rental platforms. And the ruling of the Irish judges proves them right. So if you also have rental income from other platforms (for example Fewo-Direkt or other holiday accommodation portals), you should also act quickly.

Call now (02738/6888713) or write to us. We will support you competently, quickly and reliably.

Apply for Corona aid now

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Corona-Überbrückungshilfe jetzt beantragen

The period for bridging aid in the event of a loss of turnover due to corona ends on 31 August. Examination and application by tax consultants

If your company or you as a freelancer, solo self-employed etc. have got into a predicament or even an emergency situation due to the Corona pandemic, you should now apply for bridging aid for small and medium-sized enterprises (SMEs). The application period for the aid provided for in the 25 billion euro economic stimulus and crisis management package of the Federal Government ends on 30.9.2020. The aid can only be applied for by a tax consultant or auditor. I would be pleased to support you.

Überbrückungshilfe Übernahme von Fixkosten

What is behind the aid?

The German government wants to help companies whose turnover has dropped significantly due to the corona epidemic. Although there is no restriction to certain industries, the focus is on "particularly affected industries", as stated in the government's key issues paper. These are mainly the companies that have got into an emergency situation due to the corona-related closures, for example event agencies, restaurants, hotels, clubs, travel agencies. But also solo self-employed persons, freelancers and non-profit organisations can benefit from the Corona bridging aid. So please check your eligibility. The support is granted for three months from the date of application.

What is the difference between corona bridging aid and emergency aid?

In the case of bridging aid for Corona-related failures, you may be able to obtain a significantly higher amount of support than with immediate aid. Up to 150,000 euros of your fixed operating costs can be reimbursed.

However, the application hurdles are also much higher. If the immediate aid - as its name suggests - was paid out immediately and without prior verification, you must provide evidence of loss of sales for the bridging aid. However, it is not enough to prove your fixed costs and losses yourself, you must have them confirmed by a tax consultant or an auditor. I would be happy to do this for you.

Under what conditions do you receive the bridging allowance?

If you have been or are forced to partially or completely cease your business activities due to the Corona pandemic, you can apply for it through a tax consultant (or auditor). To do so, you must have lost at least 60% of your turnover in April and May 2020. If this is met, you can apply for the subsidy for up to three months. The support will be granted if your turnover has fallen by at least 40% in at least one of these months. You can apply for the subsidy for any continuous period of three months between June and October. If your company was founded after April 2019, November and December 2019 will be used as the reference period. However, your company must not have been in difficulty on 31 December 2019 in order to qualify for support.

What will you be reimbursed by the Corona bridging grant?

You will receive support exclusively for your fixed operating costs, such as rent, interest on loans, leasing instalments, personnel costs, etc. Your living costs are not covered by the bridging allowance. Contracts for which fixed operating costs are incurred must have existed before 31 March. If, for example, you bought a car in April and finance it, you will not be paid anything.

The scale for the reimbursement of fixed operating costs under the bridging allowance is as follows:

  • Sales decrease < 40%: No reimbursement
    Decline in sales between 40% and 50%: Reimbursement max. 40%
    Decline in sales between 50% and 70%: Reimbursement max. 50%
    Sales decline >70%: Refund max. 80%
    Companies with max. 5 employees: reimbursement max. 9,000 euros*.
    Companies with max. 10 employees: reimbursement max. 15,000 Euro*.
    Maximum reimbursement amount per company: EUR 150 000
    Overpayments are to be repaid

* These amounts should only be exceeded in exceptional and duly justified cases

How can you apply for the bridging allowance?

The application can only be made online, by a tax consultant or auditor. The reason for this is the mandatory examination of the actual decline in turnover. I would be happy to take over the application process for you. I will calculate your exact turnover and check which costs are fixed and which are variable. Only with the knowledge of the exact figures your application has a chance of success. I will also assist you in calculating the turnover after a further three months and inform the responsible office.

What's the process?

When applying for the Corona bridging allowance, I first estimate your sales in April/May 2020 on the basis of your financial accounting and give a forecast of your fixed operating costs during the three funding months. If the conditions are met, I will apply for the subsidy online with the corresponding proofs. After three months, I will also check the actual sales during the funding period and submit this to the responsible office. By the way: The costs for the services of the tax consultant are also fixed operating costs and therefore eligible for funding.

Please contact me if the conditions for the bridging subsidy are met. I look forward to hearing from you.