When is it worthwhile to lodge an objection to the tax assessment notice?

If you are financially disadvantaged by your tax assessment, you can lodge an appeal. This is particularly worthwhile if the tax office has not recognised certain costs or if there are calculation errors. Below, you will find out in which cases an appeal is advisable and what you should pay attention to.

When is it worth appealing against the tax assessment?

An appeal against the tax assessment is worthwhile if you are financially disadvantaged by the decision. Common reasons for this are:

• Forgotten expenses: You did not include certain costs (e.g. work-related expenses or special expenses) in your tax return and wish to correct this retrospectively.
• Unrecognised work-related expenses: The tax office has not taken into account, for example, travel expenses, costs for a home office or work materials.
• Unconsidered household-related services: Expenses for craftsmen's services or domestic help were not recognised.
• Unapplied taxpayer-friendly rulings: The tax office has not considered current rulings or administrative instructions that could lead to more favourable taxation.
• Incorrect calculation: There may also be calculation errors by the tax office that lead to a higher tax burden.

Tip: Check the “Explanations of the assessment” carefully

Pay particular attention to the “Explanations of the assessment” in the tax assessment. This section is located below the calculation and contains detailed information on why the tax office has not recognised certain work-related expenses or special expenses.

If the reasons are unclear or contradictory, it may be worthwhile to contact the tax office directly. Often, discrepancies can be clarified in a short phone call without the need to formally lodge an appeal.

Conclusion: Carefully consider an appeal against the tax assessment

An appeal against the tax assessment can be financially worthwhile if there are justified objections. Therefore, check the assessment carefully, especially the explanations of the assessment. In case of doubt, a call to the tax office or advice from a tax advisor can help.

When is it worthwhile to lodge an objection to the tax assessment notice?

Objection or simple amendment?

If you have discovered errors in your notice or gathered good reasons against a deletion, lodge an objection to your tax notice.

You have one month from receipt of the tax notice to lodge your objection. To meet the deadline, an informal objection letter is initially sufficient - even without reasons. You can send the reasons to the tax office later or withdraw the objection - without risk or cost. You can find templates in our sample letters.

However, if you only want to submit proof for a specific expense that has turned up in a drawer, the so-called simple amendment is sufficient. The difference from an objection is that the tax office may only change this point in your tax notice.

Objection or simple amendment?

Can I submit the objection by e-mail?

In addition to the "normal" written form (letter or fax), an objection can also be submitted via simple e-mail if the tax office provides an e-mail address on the tax assessment notice. The required written form is thus maintained.

If you submit an objection by e-mail, you cannot later prove whether and when the message reached the tax office. If it is important to meet deadlines, you should send by registered post or fax instead.

Legal basis: In principle, you must submit your objection in writing (§ 357 para. 1 sentence 1 AO). However, according to § 357 para. 1 sentence 2 AO, it is sufficient if the document shows who (name and address) submitted the objection.

A signature is therefore not a mandatory requirement. § 87a para. 1 sentence 1 AO also permits the transmission of electronic documents, provided the recipient has opened access for this purpose. If an e-mail address is provided on the tax assessment notice, this indicates the tax office's willingness to receive electronically.

Can I submit the objection by e-mail?

What happens after I have lodged an objection?

After submitting the objection, the tax authority will review the notice thoroughly. They will first decide whether the objection is admissible. An objection may be admissible but unfounded and therefore rejected.

If the result is "clearly admissible", a decision will be made on the objection. Relief is granted if the tax office agrees with the applicant's reasoning and amends the tax notice accordingly. If the tax office only partially agrees with the applicant's reasoning, this is referred to as partial relief. The term objection decision implies a rejection. In this case, the tax office refuses to amend the notice.

If the objection fails at the tax office, unlike a correction request, you can file a lawsuit against the objection decision at the tax court and hope for a more satisfactory verdict, possibly even including compensation.

By lodging an objection against the tax notice, you can potentially receive a significant refund following a later court ruling. It is advisable to look into the various test cases and check the payments and data in the tax notice.

What happens after I have lodged an objection?

What is meant by "deterioration"?

Once you have lodged an objection, your tax office must make a decision. This means the tax officer will review your tax return point by point. As a result, they may find errors elsewhere or disallow expenses.

For example: You have objected to your tax assessment because the tax office did not recognise work-related expenses of 250 Euro. You then receive a letter from your tax office stating that the claimed work-related expenses will be recognised. However, upon closer examination, it was found that the tax office does not recognise the conditions for other income-related expenses. The removal of these other expenses may lead to an increase in your tax liability. This is permissible.

If such an increase in the tax assessment is imminent, the tax office must inform the taxpayer in advance. The person lodging the objection can generally avoid the increase by withdrawing their objection (§ 362 AO). Although your objection will then lapse and the tax assessment will become legally binding immediately, the announced increase will also be dropped.

What is meant by "deterioration"?

What costs are incurred for an appeal?

The tax office is not allowed to charge any fees for the review – even if the supposed error turns out to be correct in the end. Therefore, an objection usually does not result in any disadvantages for you (exception: "deterioration").

After the objection has been submitted, the tax authority will review the notice thoroughly. The caseworker will first decide whether the objection is admissible. An objection may be admissible but unfounded and therefore rejected. If the tax office agrees with you on all the points raised in your objection, you will receive a new corrected tax notice at the end of the objection procedure.

Unfortunately, not every objection is successful. However, all is not lost. Within one month of receiving the objection decision, you can file a legal action with the relevant tax court. In this case, you should be represented by a specialist tax lawyer.

The supreme financial authorities of the federal and state governments take the view that an objection can also be lodged by simple e-mail. This view is confirmed by the clarifying amendment to section 357 (1) of the Fiscal Code in the E-Government Act of 25 July 2013.

What costs are incurred for an appeal?

How do I withdraw an objection?

If you have lodged a precautionary objection against your tax assessment notice, you can withdraw it at any time.

If the objection against the tax assessment notice is withdrawn, the provisional status also ends and the tax assessment becomes final. This means that no further measures can be taken against it and you accept the decision of the tax office (i.e. the tax assessment).

How do I withdraw an objection?

If your objection is upheld...

If the tax office agrees with all the points raised in your objection, you will receive a new corrected tax assessment notice, known as a remedial notice, at the end of the objection procedure.

The amended tax assessment notice will show the changes compared to the "old" tax assessment notice. It will also, of course, display the new and corrected tax refund.

If your objection is upheld...

What should I do if my appeal is rejected?

Unfortunately, not every objection is successful. However, all is not lost. Within one month of receiving the decision on the objection, you can file a lawsuit with the relevant tax court.

You can find out which tax court is responsible in the instructions on legal remedies, which must be attached to the rejection notice. As with the objection, the lawsuit must be submitted in writing or recorded in writing.

However, this should be well considered. Unlike an objection, a lawsuit is subject to a fee. The amount depends on the value of the dispute and the type of hearing. Court expenses, such as postage and writing costs, and legal fees are additional.

In any case, consult a tax advisor or specialist lawyer beforehand.

What should I do if my appeal is rejected?

Are interest payments on tax arrears of 6% p.a. constitutional?

Anyone receiving their tax assessment later than 15 months after the tax year must pay additional interest on tax arrears. This interest on arrears is 0.5 percent per full month. Conversely, those receiving a tax refund receive corresponding interest on refunds (§ 233a AO).

The interest rate is stipulated by law (§ 238 AO). An interest rate of 6 percent p.a. is extraordinarily high today, given that market interest rates have been close to zero or even negative for several years. In comparison, the tax office's interest rate of 6 percent today represents a striking imbalance between performance and consideration, thus constituting usury (§ 138 BGB). Usury occurs when the interest rate demanded is twice as high as the comparable market interest rate. Tax law has long lost any connection to current market interest rates.

What has happened so far?

• In July 2014, the Federal Fiscal Court ruled that the statutory interest rate of 6 percent per year was (still) not unconstitutional until March 2011 (BFH ruling of 1.7.2014, IX R 31/13). The BFH also deemed the interest rate constitutional in 2013 (BFH ruling of 9.11.2017, III R 10/16).
• Finally, in April 2018, the Federal Fiscal Court could no longer evade a reality-based decision after several "unrealistic" rulings: The highest financial judges finally expressed "serious" doubts about the constitutionality of the 6 percent interest rate, but only for interest periods from 2015! (BFH decision of 25.4.2018, IX B 21/18).
• Another senate of the BFH also admitted serious doubts about the constitutionality of the 6 percent interest rate and agreed with this view. Even better: The presumed unconstitutionality is to apply to interest periods from November 2012 (BFH decision of 3.9.2018, VIII B 15/18).
• Since mid-June 2018, the tax authorities have granted a suspension of execution in the case of tax arrears for assessed interest on arrears. This meant that taxpayers did not have to pay the interest on arrears for the time being. However, this only applied if you submitted a corresponding application, preferably in the form of an objection, to the tax office.
• From May 2019, tax offices will issue all tax assessments with interest on arrears or interest on refunds of 0.5 percent per year with a provisional note in accordance with § 165 para. 1 sentence 2 no. 3 AO (BMF letter of 2.5.2019, BStBl 2019 I p. 448).

Who is affected by the change in tax interest?

Since May 2019, all tax assessments regarding tax interest have included a provisional note. Therefore, after a legal amendment, the tax offices must change these tax assessments on their own initiative (BMF letter of 2.5.2019, BStBl 2019 I p. 448). Anyone who had to pay tax arrears and consequently interest on arrears for periods from 2019 will receive money back. Conversely, it is also likely that anyone who received a tax refund and thus interest on refunds for periods from 2019 will have to repay part of it.

It remains to be seen whether the tax authorities will actually dare to collect the unconstitutional interest. In fact, the Fiscal Code protects the taxpayer's trust in a tax assessment issued in their favour. However, the tax authorities have already indicated that they consider a breach of this principle permissible in the specific case of interest on refunds. And indeed: According to § 31 para. 2 of the Federal Constitutional Court Act, a decision of the Federal Constitutional Court has the force of law in certain cases.

In this respect, the position of the tax authorities is not entirely unfounded. Attention: It will also be critical for those who applied for a suspension of execution regarding tax interest for periods before 2018: They must expect the tax authorities to demand the "suspended" interest on arrears. Again, it will be interesting to see whether the tax authorities actually demand unconstitutional interest.

What will the interest rate be in the future?

The Federal Constitutional Court does not comment on this; it is up to the legislator to determine. Due to the upcoming federal elections and the expected lengthy formation of a government, nothing is likely to be decided on the subject of "tax interest" this year. The FDP has repeatedly unsuccessfully requested that the interest rate be 1/12 of the base rate per month in accordance with 247 BGB, at least 0.1 percent (BT-Dr. 19/19158 of 14.5.2019; BT-Dr. 19/19601 p. 29).  

Are interest payments on tax arrears of 6% p.a. constitutional?

Improved minimum threshold from 2017 for taxpayers

If you forget to include expenses in your tax return, you can still claim them after receiving the tax assessment notice by lodging an objection. However, if the tax is reduced by less than 10 Euro (minimum amount) in your favour, the tax office will refuse to make a change. The reason? The Small Amounts Regulation!

According to the Small Amounts Regulation, "income tax assessments are only changed or corrected if the deviation from the previous assessment is at least 10 Euro" (KBV from 1.1.2002). This means that changes are excluded not only to the advantage but also to the disadvantage of the taxpayer.

In 2011, the Federal Fiscal Court confirmed that if a tax change is less than 10 Euro, the tax assessment will not be changed at all - neither to the disadvantage nor to the advantage of the taxpayer (BFH ruling of 16.2.2011, X R 21/10).

Currently, with the "Act to Modernise Taxation Procedures" of 18.7.2016, the Small Amounts Regulation has been changed in favour of taxpayers from 1.1.2017: In future, a tax assessment will only be changed to the disadvantage of the taxpayer if the new tax amount is at least 25 Euro higher. However, to the advantage of the taxpayer, the tax assessment will be changed as before if the new tax amount is only 10 Euro lower. Furthermore, housing premiums will only be reclaimed if the reclaim amount is at least 25 Euro - instead of the previous 10 Euro.

Improved minimum threshold from 2017 for taxpayers