Tax Return: Mandatory or Voluntary? An Overview of the Different Cases

When are you required to file a tax return?

The law is based on two questions. Is there wages from which income tax has been withheld? If so, an assessment is made only if one of the cases listed in § 46(2) of the Income Tax Act (EStG) applies. If there is no wages—for example, because the individual only receives rental income, a pension, or profits from self-employment—then the basic tax-free allowance (§ 56 EStDV) applies. Anyone who is solely an employee with no special circumstances has already paid income tax through their employer. It is then considered settled (Section 46(4) of the German Income Tax Act (EStG)).

In addition, there is an obligation that is not specified in any list of laws: If the tax office requests a return, it must be filed, even if none of the specified cases apply (Section 149(1) of the German Fiscal Code (AO)).

You must also file a tax return—regardless of your income—if a remaining loss carryforward was determined at the end of the previous year. This applies, for example, to students with anticipated income-related expenses, landlords following a renovation, or business founders. This obligation remains in effect until the loss has been fully utilized and is often overlooked.

What are the mandatory reporting requirements for wages?

The most important cases are listed in Section 46(2) of the Income Tax Act (EStG). Two of these pertain to income in addition to wages: income that was not subject to payroll tax withholding and wage replacement benefits. Wage replacement benefits are payments from the government or an insurance fund in lieu of wages, such as Unemployment Benefit I or parental allowance. These two groups are counted separately, with a threshold of €410 for each. For income in addition to wages, the net amount after certain deductions is taken into account.

The €410 threshold is not a deal-breaker. If your income, before income tax withholding, does not exceed €410, an amount equal to that figure is deducted from your income, and the remainder is ultimately tax-free. If your income exceeds that amount, a gradually decreasing hardship allowance applies up to €820. For more information, see the article on supplementary income.

Other cases: income from multiple employers at the same time, reimbursed health and long-term care insurance contributions exceeding €410, certain situations involving married couples, a registered tax exemption, other income not taking into account previous employment, and remarriage in the year a marriage is dissolved. Additional special cases are specified in the law.

When is an employee required to work without pay?

Anyone whose total income exceeds the basic tax-free allowance must pay taxes, even if they do not receive wages. This applies, for example, to self-employed individuals, landlords, and retirees. For jointly assessed taxpayers without wages, the double basic tax-free allowance applies (Section 56 EStDV). This applies only if neither spouse has received wages with tax withheld: As soon as one of them receives wages, the double basic tax-free allowance no longer applies; instead, the list of mandatory cases applies.

Total income is neither gross revenue nor taxable income. It refers to the sum of income—that is, for self-employed individuals, profit rather than revenue—before special expenses and extraordinary expenses (Section 2, paras. 3 and 4 of the Income Tax Act (EStG)).

The obligation to pay tax does not mean paying tax, because deductions are applied afterward. A retiree with total income of €12,900 in 2026 exceeds the threshold of €12,348 and must pay tax. If special expenses, such as health and long-term care insurance totaling €1,400, reduce her income to €11,500, she will ultimately owe no tax. However, she is still required to file a tax return.

Anyone who has income from agriculture, forestry, business, or self-employment must file the return electronically, unless the income falls under one of the cases listed in Nos. 2 through 8 regarding wages (Section 25(4) of the Income Tax Act (EStG)). To avoid undue hardship, the tax office may waive this requirement upon request. Thus, self-employed individuals must file electronically, while employees do not. Depending on their circumstances, business owners may also file VAT and trade tax returns.

Who can file a tax return voluntarily?

Anyone who has received wages with income tax withheld and is not otherwise required to file a tax return. You can apply for an assessment “in particular to have the income tax withheld from wages credited against income tax.” The application is the income tax return itself (Section 46(2)(8) of the Income Tax Act (EStG)). The tax office then calculates the tax for the entire year.

The result could be a refund, but it could also result in an additional payment. It's not clear beforehand.

How far back does a voluntary statement go?

Four years. The assessment period is four years (Section 169(2) of the German Fiscal Code (AO)) and begins at the end of the year in which the tax became due (Section 170(1) AO). There is no suspension of the statute of limitations, as there is in mandatory cases, because there is no tax liability; the four-year period begins at the end of the tax year. For 2025, the statute of limitations ends on December 31, 2029. Accordingly, in 2026, the 2022 tax year is the last one that can still be voluntarily reported by December 31, 2026.

The declaration need only be received by that date; it does not have to be processed: If the application is filed before the deadline expires, the deadline does not expire until a final decision has been made on it. Anyone who files on December 30, 2029, for the year 2025 will not lose anything.

What happens if no explanation is provided?

It depends on the case. Anyone required to file a return risks a late-filing penalty, an estimated assessment, and, in case of doubt, a coercive fine. The rules regarding this are outlined in the article on the filing deadline. Anyone who files voluntarily is not subject to a deadline and will not incur a penalty. The late filing penalty requires that the taxpayer be obligated to file a return (Section 152(1) of the German Fiscal Code [AO]). However, once the four-year deadline expires, the option to still request an assessment is no longer available.