Tax return for seniors: How pensioners avoid trouble with the tax authorities

Attention pensioners: Among other things, because of the annual pension increase, you may be required to file a tax return. You can read here how to get a simplified tax return and what penalties you will face if you are late.

More and more retirees have to file a tax return, often without being aware of it. The tax authorities offer easier options for the submission, but also threaten with penalties in the event of delays.

Daniel Schollenberger is tax expert for the portal of Wolters Kluwer.

The taxation of pensions is the focus of the tax authorities due to the annual increase in pensions. The reason: Many retirees were exempt from tax returns before 2005 and often exceed the tax exemption after several years of pension increases. Others slip into pension taxation without knowing it due to the death of their partner. Behind this is that splitting advantages expire after the death of the partner.

Strictly speaking, pensioners would therefore have to recalculate every year whether they are not now subject to taxation. The Federal Ministry of Finance, for example, reveals in overviews which gross annual pension remains tax-free in the respective calendar year.

In the past, the tax authorities tried to simplify the taxation procedure for pensioners with the simplified tax return or official assessment. Nevertheless, pensioners also face fines if they are handed in late.

Why there is a risk of late payment despite a tax return

When a tax return is “punished” too late, there is unequal treatment: If the pensioner is asked by the tax office to submit a tax return, the so-called pension scheme applies. As a result, this regulation grants those affected a retroactive extension of the deadline. This exemption corresponds to the actual circumstances of the person concerned, in other words, to put it simply: Those who have been drawing a pension for a long time no longer care as much about tax issues as an employee, for example.

However, if the pensioner himself finds out that he or she has to file a tax return due to the pension increase or the death of the partner, but then submits this declaration too late, the exemption rule does not apply. Instead, the retirees are charged a late fee in addition to interest.

According to the rules that have been in force since 2019, there is little room for maneuver: A late payment surcharge is set if the tax return is not submitted within 14 months of the end of the tax year. That means: Anyone who does not submit their tax return for 2018 until March 2020 or afterwards will automatically receive a late payment surcharge. This is then 0.25 percent of the tax minus the advance payments and the tax deductible amounts for each commenced month, but at least 25 euros per month – a lot comes together here.

My recommendation: As a pensioner, it is better to wait to see whether the tax office wants to see a tax return.

“Simplified tax return” and the “official assessment”

I mentioned earlier that the tax authorities help pensioners with taxes and – not entirely altruistically – make certain processes easier for them. However, many of those affected are not aware of these possibilities, so a brief explanation.

The states of Brandenburg, Bremen, Mecklenburg-Western Pomerania and Saxony offer the “simplified tax return”. Together with the Federal Ministry of Finance, you have started a pilot project to simplify tax returns for pensioners. They are aimed at people from whom the tax office has already received the vast majority of tax-relevant information electronically from third parties. That means: The tax office already knows the pension income or pensions as well as the health insurance contributions, since the corresponding figures are automatically sent to it every year.

In Mecklenburg-Western Pomerania and Bremen, on the other hand, there is the option of “official assessment”. This means having the tax office assess you for tax purposes without any action on your part. This is called official assessment.

In this case, the tax office is automatically informed by the pension provider about the amount of the pension. However, this only applies to pensions from certain sources. These include statutory pension insurance, the agricultural retirement fund, professional pension funds, pension funds, pension funds and insurance companies. Only those who have no other income apart from such a pension can claim the official assessment. If, for example, the pensioner has income from renting an apartment in addition to his pension, he cannot be taxed.

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Both approaches – the simplified tax return and the official assessment – have the disadvantage that many retirees are not told which costs they can deduct and thus reduce their tax burden. However, there are numerous options here, for example with a view to medical costs, ancillary costs, care costs, the disability card and much more.

Daniel Schollenberger is the portal’s tax expert by Wolters Kluwer.