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In the end the tax office waits

4. May 2020, 06:54 pm

Short-time work, emergency aid, loans – the consequences of the Corona crisis are to be mitigated for many means. But the day of reckoning comes with the tax assessment.

An analysis by Karin Finkenzeller

The picture leaves no doubt, here you prepare for an exchange of blows: Frankfurt tax attorney Patricia Lederer has the boxing gloves prominently placed on their website. At their YouTube lectures they hang also clearly visible behind her on the shelf. “This is our trademark,” says Lederer. Her law firm represents mainly small and medium-sized companies with three to a few hundred employees. In the Corona crisis] she’s expecting subsequent fights for unbureaucratically approved subsidies. On the other side the employees of the tax offices are also warm. Although billions federal and state rescue programmes to reduce the economic effects of the pandemic, it is already certain now:
With the tax assessment for 2020 at the latest there will be a rude awakening. Even the tax-free short-time work allowance is not included in this.

“Goodwill and tax office are two mutually exclusive words,” warns Lederer. Any taxpayer affected by the Corona crisis could, admittedly, currently request deferments or reductions for advance payments to be made. The Enforcement of decisions from earlier years is not currently stopped by all tax offices: “The Federal Ministry of Finance has only issue a debit note. This is done from office to office and sometimes even within the Office varies from department to department.” There were no guidelines for tax audits at this time.

While Lufthansa, threatened with bankruptcy,  drives a hart bargain to create the conditions for a state aid and even failure cannot be excluded, support for the self-employed and small and medium-sized enterprises often comes almost overnight. Applied for today, possibly tomorrow – for many companies, which fear for their existence, a large relief. For now.

Because as quickly and unbureaucratically as the support for initially three months, it has several hooks. Firstly, it is only intended for acute liquidity bottlenecks. Roughly speaking: If the receipts are not sufficient to cover the costs for the next months.

On the other hand, it is only intended to cover operating costs. Rent, electricity and telephone for the office or a workshop may be denied with it, but not corresponding expenses for your own apartment. Wages of the employees may be paid with it, but not the purchase of food for private consumption. This is a particular problem for all solo self-employed people who often work from home.

“There was a failure to properly explain”

On some websites of the federal states these conditions were not formulated clearly enough in the first few days, perhaps also in the optimistic assumption that the available money will be sufficient for all areas. In the meantime the informations have been refined. Anyone who fears that they will no longer be able to cover their personal living costs can apply for basic income support. So Hartz IV, the usual asset audit was given up for this. Nevertheless, many feel that the step to the office is degrading. Bavaria´s prime minister Markus Söder is therefore making an extra 3,000 euros available for artists.

“There was a failure to properly enlighten,” criticizes Thomas Eigenthaler. He is head of the German Tax Union and represents around 110,000 employees in the 600 german tax offices. In his opinion, no one should let the deadline for applying for subsidies, which expires on 31 May, pass out of uncertainty. But anyone who receives 9,000 euros as a solo selfemployed person or entrepreneur with up to five employees or 15,000 euros as a small medium-sized company should, in case of doubt, put the sum aside: “I can only advise those affected to use this emergency aid sparingly, at least now,” says Eigenthaler. “They are threatened with having to pay it back. If it turns out that false statements were made intentionally, there is even a threat of criminal proceedings for subsidy fraud.” That can mean fines or up to five years in prison.

“In clear cases where there is no need for existence, we advise repayment”, says tax consultant Jan Brumbauer from the consulting firm Ecovis, which is specialised in medium-sized businesses. “The alternative to voluntary repayment is not a nice one. The state reclaims the money, probably plus interest. If the crime rate is clearly higher, we do not even rule out criminal prosecution,” warns Brumbauer.

“There will be copycats en masse”

Even if everything goes right, emergency aid is not a gift. It is true that they will not be used in the course of the 2020 tax year to calculate the advance tax payments – which are often suspended on application at present anyway. But the grants must be declared on the next tax return. If a profit was made, they have to be also taxable. So 2021 or at the beginning of 2022 at the latest.

Not all licensing offices give the tax offices the same necessary information to the hand. Hesse, for example, does it. In order to receive emergency aid, the applicant must “sign his own own death warrant”, as lawyer Lederer expresses drastically. Those who do not tick the box for the lifting of tax and banking secrecy cannot send the online document at all.

Eigenthaler from the tax union sees it realistically in such a way: Since the tax offices are already lacking around 6,000 staff today, it would not be possible to “jump on every case”. But there must be spot checks, if only to avoid endangering the sense of justice in society: “You have to be careful that some people don’t get the feeling that they being checked and rechecked and others are going very, very fast. This can only be compensated for by carrying out an evaluation for at least a certain part of the cases”. Tax investigators, who seize documents on the spot, probably do not need it, says Eigenthaler. “This is a limited business transaction. We have received a payment that must be evaluated. It can also be done in-house at the tax office.”

Insolvency as a chance for a new beginning

The situation is likely to be different in the event of a delay in filing for insolvency. The obligation to apply is suspended until the end of September. But this is “just a sedative pill”, says restructuring expert Lucas Flöther. The former insolvency administrator of Air Berlin, who is currently also responsible for the protective umbrella proceedings at the airline Condor, expects that the emergency aid and state-guaranteed loans will also keep companies artificially alive. “There will be free riders en masse.”

This can become serious for their business partners, who rely on liquidity that is in reality not available and may themselves get into difficulties as a result of unpaid invoices. Well-advised entrepreneurs would not only consider insolvency as a duty, says Flöther. It is also a chance for a real new beginning.

In order to avoid an imbalance, numerous companies have announced short-time work in recent weeks and are saving money as a result. Their employees may not even suspect that they will have to file a tax return next year. Even if this obligation did not apply to them before. The expected tax refund will probably be lower than in the past, in some cases even an additional payment may be due. The crux means progression proviso.

“You don’t have to give the state anything either”

The short-time working allowance from the state does not have to be taxed. However, it is taken into account when determining the tax rate for the other taxable income. The head of the German Tax Union explains it like this: “Let’s assume that ten months of regular work and two months of short-time work allowance were paid. Then the tax rate in increased by one to two percent for the salary during the ten months because of the two months of short-time work. This increase in the tax rate then has the effect of additional payment.”

Eigenthaler has another tip, so that the surprise is as little negative as possible: For ten months of regular activity, all supporting documents relating to expenditure for professional purposes – so-called incomerelated expenses – should be kept and submitted. “You don’t have to give the state anything either. Through careful research and remembrance some negative effects can also be compensated.

Quelle: Die Zeit