More and more retirees slipped into tax liability unnoticed.

Only a letter from the tax office reveals to them that they have to transfer money retrospectively, which they have often already spent.

The German Association of Tax Consultants is therefore pushing for a kind of income tax for pensioners.

"Practical experience shows that retirees find it difficult to even think about filing a tax return," says President Torsten Lüth in an interview with the FAZ.

And then come the corresponding requests, ”he continues.

Corinna Budras

Business correspondent in Berlin.

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Manfred Schäfers

Business correspondent in Berlin.

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In Lüth's experience, late retirees are confronted with at least the absence of a tax return, often two or more. "Then there will inevitably be an additional payment." He is not talking about seniors with additional income from renting, for example. They would know what to do. He speaks of the classic pensioner who actually wants to enjoy retirement. “Of course, it doesn't stop with the additional payment,” emphasizes the tax advisor.

In addition, there would be a subsequent advance payment plus an advance payment every three months for the future.

"The problem is: the pensioner is not prepared for it." If he is confronted with the additional payment and has to transfer a whole month's pension to the tax office, that is a problem.

That is why it would be better if the pension insurance, like an employer, would automatically withhold the tax authorities' claims and transfer them to the tax office.

Where it is clear that the taxable portion is below the basic allowance, the pensioner will continue to be spared any deduction.

"In the age of digitization, everything can be programmed wonderfully."

The taxable portion increases 

As the Federal Statistical Office recently announced, last year 21.8 million people received benefits totaling 341 billion euros from a statutory, private or company pension; there were 146,000 more pension recipients than in 2019. Almost 64 percent of pension benefits were most recently taxable income. This means that the average tax rate has increased by more than 8 percentage points. It is not yet known how many retirees ultimately had to pay taxes in 2020, because filing and processing tax returns can take a long time. The latest evaluation by the Federal Statistical Office provides figures for 2017: According to this, 600,000 pensioners paid income tax without any further income, as well as 4.9 million retirees with additional income.

Ultimately, one wants to get to the point where pensions and pensions are taxed equally. The aim of the tax authorities is to switch to the downstream taxation of pension payments, pensions are traditionally subject to income tax. In order to protect the federal budget, one proceeds in small steps. The contributions to pension insurance are increasingly being taken into account for tax purposes. In return, salaries are more and more burdensome in old age. How much you have to pay tax depends on when you retire. Pensioners who retired in 2005 or earlier still only have to pay tax on 50 percent of their retirement benefits. This means that the vast majority of those who have no further income are below the basic tax allowance.

But the taxable share increases noticeably. Up to 2020 it went up by two percentage points annually, now the share is increasing by one percentage point per year. The goal is 100 percent by 2040. For new retirees in 2021, the share that the tax office is interested in is 81 percent. The respective share is converted into a fixed amount; this pension allowance accompanies the retirees until the end of their days.

The transition to downstream pension taxation is legally tricky.

What was taxed with the contribution, the tax authorities are not allowed to charge a second time in old age.

The Federal Fiscal Court dealt with the issue at the end of May.

He decided on the submitted cases in the interests of the financial administration.

Thereafter there has been no double taxation so far.

At the same time, he made it clear that future cohorts of pensioners are likely to be affected by double taxation of their retirement benefits.

The Federal Ministry of Finance therefore announced that it would initiate a tax reform at the beginning of the next legislative period that would avoid this.

The President of the Tax Advisor, Lüth, advocates using the opportunity to exempt pensioners without additional income from the burden of having to submit a tax return.

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