Debts to the tax office and no money - what to do?

What to do if you have debts to the tax office as a self-employed person - tax debts?

Debts to the tax office can become an overwhelming burden for many people, especially when money is scarce or not available at all. This situation is not only financially burdensome, but can also cause considerable emotional stress. However, there are ways to deal with this challenge. This article provides a comprehensive overview of what you can do if you have tax debts and are unable to pay them.

Proactive steps

Keep calm. A clear head is important in order to think properly. Such situations do not usually arise suddenly and cannot be resolved immediately. You won't go to prison for this!

If you do not yet have a Attachment protection account it's a good time to do it!

1. contacting the tax office

The first and most important step is to communicate directly with the tax office. Many people tend to bury their heads in the sand out of fear or shame, but this only makes the situation worse.

• Timely contactAs soon as you realize that you cannot pay your taxes on time, you should contact the tax office immediately. The sooner you do this, the more options are open to you.
• Honest presentation of the situationExplain your financial situation openly and honestly. The tax office is often willing to find solutions if you show a willingness to cooperate.
• DocumentationKeep a written record of all communication. Note the date, time and content of telephone calls and keep copies of all correspondence.

2. apply for deferral

A deferral is an official postponement of the payment deadline. This can give you the time you need to get your finances in order.

• Written applicationSubmit a written request for deferral. This should contain the following information:
  • Your Tax number
  • Your tax identification number
  • The exact amount for which you are requesting a deferral
  • A detailed explanation of why you are currently unable to pay
  • If possible, a proposal as to when and how you could make the payment
• Enclose supporting documentsEnclose evidence documenting your financial hardship with your application. These can be bank statements, payslips or other relevant financial documents.

3. apply for payment in installments

It is often easier to repay a large sum in smaller installments. An installment agreement can help you to pay off your debts gradually.

• Realistic payment planPropose an installment plan that you can actually keep. It is better to pay smaller installments over a longer period of time than to make unrealistic promises.
• FlexibilityBe prepared to negotiate with the tax office. You may be able to agree a plan where the installments increase over time as your financial situation improves.

When the executor arrives

Despite all efforts, an enforcement officer may come to you. In this situation, it is important to remain calm and to know the rights and obligations of both sides.

Powers of the enforcement officer:

1. Entering the apartmentThe official may enter your home to search for attachable items. He must identify himself and explain the reason for his visit.
2. SearchHe may open cupboards, drawers and other containers in order to find attachable items. However, he may not forcibly open locked rooms or containers.
3. SeizureThe official can seize cash, valuables or other assets. However, certain everyday items are exempt from seizure.
4. AffidavitIn extreme cases, the officer may require you to make an affidavit about your financial circumstances.

Recommended behavior:

• Keep calmRemain polite and cooperative. Aggressive or threatening behavior will only make the situation worse.
• Check identityAsk to see the officer's identity card and make a note of his name.
• Explain your situationInform the official about your financial situation and any ongoing negotiations with the tax office.
• NegotiateAsk for the possibility of agreeing a payment plan or deferral. Enforcement officers are often willing to give you time to negotiate with the tax office.

Possible solutions

1. draw up a payment plan

Develop a detailed and realistic plan for repaying your debts. This should take the following points into account:

• Your current income and expenses
• Opportunities to reduce expenditure
• Potential additional sources of income
• A time frame for full repayment

Present this plan to the tax office. A well-thought-out proposal shows your willingness to solve the problem and can put the authority in a positive mood.

2. consider taking out a loan

In some cases, it may make sense to take out a loan to settle tax debts. Please note:

• Compare the interest rates: The interest on a bank loan is often lower than the tax office's late payment penalties.
• Check various loan offers: Banks, credit unions or reputable online lenders may be eligible.
• Consider the long-term effects: Make sure you can afford the loan installments.

3. hardship application

In special cases, partial or full tax remission can be applied for. However, the conditions for this are very strict:

• Demonstrable extreme financial hardship
• No prospect of an improvement in the financial situation in the foreseeable future
• Collecting the tax debt would lead to a situation that threatens the company's existence

A hardship application should be well-founded and supported by all relevant documents.

Professional help

If the debt situation with the tax office is too complex or you feel insecure, do not hesitate to seek professional help:

• Debt counseling centersThese offer free or low-cost advice and can help you to review and improve your overall financial situation.
• Tax consultantA tax advisor can help you negotiate with the tax office and possibly find ways to reduce your tax burden.
• LawyerIn particularly difficult cases or when legal action becomes necessary, a lawyer specializing in tax law can provide valuable support.

Important to note

• Statute of limitationsThe limitation period for tax debts rarely expires in practice. The tax office has various ways of restarting the limitation period again and again. Therefore, do not rely on the fact that your debts will simply "disappear".
• Consequences of inactionDo not ignore your tax debts. This can lead to stricter enforcement measures, higher costs due to late payment penalties and in the worst case even lead to criminal prosecution.

Conclusion

Dealing with Tax debts to the tax authorities / Debts to the tax office requires courage, honesty and proactive action. The key lies in open communication with the tax office and developing realistic proposals for solutions. The earlier you take the initiative and the more cooperative you are, the greater your chances of finding a solution that is acceptable to both sides.

Remember that you are not alone in this difficult situation. There is professional support and ways out of the crisis. With the right approach and the necessary perseverance, you can overcome your tax debts and make a fresh start.

Frequently asked questions (FAQ)

Can you go to prison for tax debts?

This question is on the minds of many people with tax debts. The short answer is Germany you won't go to prison just because of your debts. However, there are some important points to bear in mind:

• Debts alone are not grounds for imprisonmentThere is no debt imprisonment in Germany. This means that you won't go to prison just because you can't pay your taxes.
• Tax evasion is punishable by lawIf you deliberately make false statements or conceal income in order to pay less tax, this can be considered tax evasion. Tax evasion is a criminal offense that can be punished with imprisonment in serious cases.
• Enforcement detention for refusal to provide an affidavitIf you refuse to make the affidavit, the court can order what is known as enforced detention. This serves to get you to make the declaration, not as a punishment for the debt itself.
• Consequences of non-compliance with court ordersIf you disobey court orders in connection with your tax debts, this can lead to legal consequences, which in extreme cases can include imprisonment.
• FraudIf you deliberately conceal assets or make false statements in order to avoid paying tax debts, this could be considered fraud, which may have criminal consequences.

In other countries

• Greece: Tax debtors can actually face prison sentences here. Debts of 5,000 euros or more can result in prison sentences of between twelve months and three years
• France: A prison sentence is rather unlikely for the mere non-payment of taxes due to a lack of funds. For tax debts over 50,000 euros that involve fraudulent actions, additional sanctions such as publication of the information on the tax authority's website for up to one year may apply

Important to noteIt is important to emphasize that criminal prosecution is usually only considered if there is evidence of intentional fraud or tax evasion. In the case of financial difficulties it is advisable to contact the tax authorities at an early stage to discuss possible solutions such as installment payments or payment deferrals.

What is an affidavit?

An affidavit, formerly also known as an "oath of disclosure", is a comprehensive declaration about your financial circumstances that you make under oath.

• PurposeIt serves to give the creditor (in this case the tax office) a complete overview of your financial situation.
• ContentsYou must disclose all your assets, income, debts and regular expenses.
• ConsequencesSubmitting a false affidavit is punishable by law. It is therefore extremely important to provide all information truthfully and completely.
• ConsequencesAfter submitting the affidavit, your data will be kept in the debtor register for three years, which can significantly affect your creditworthiness.

What are late payment penalties?

Late payment surcharges are additional fees levied by the tax office if taxes are not paid on time.

• HeightAs a rule, they amount to 1% of the tax arrears per month.
• CalculationThey are charged for each month of default or part thereof.
• AvoidanceLate payment surcharges can be avoided by paying on time or applying for a deferral.

What does "seizure" mean in the context of tax debts, debts to the tax office?

Seizure is a measure of compulsory enforcement in which the tax office accesses your assets in order to settle outstanding tax debts.

• ObjectsCash, valuables, but also receivables (e.g. salary) can be seized.
• BoundariesCertain items and part of your income are protected against seizure in order to secure your livelihood.
• ProcedureAn enforcement officer comes to you and carries out the garnishment. Your employer will be informed if your salary is garnished.

What is a deferral request?

A deferral request is a formal request to the tax office to postpone the due date of a tax debt.

• PurposeIt gives you time to get your financial affairs in order.
• PrerequisitesYou must prove that immediate payment would cause considerable hardship.
• DurationThe deferral can be granted for a certain period of time or until a fixed date.
• InterestAs a rule, interest is charged for the deferral period.

Can I get rid of my tax debts in insolvency proceedings?

Tax debts can generally be part of insolvency proceedings, but there are some important points to bear in mind:

• Regular tax liabilitiesThese can be treated like other debts in insolvency proceedings and may be partially waived.
• ExceptionsTax debts resulting from tax evasion are excluded from residual debt discharge.
• New tax liabilitiesTax debts arising during the insolvency proceedings must be paid in full.
• Consulting: You should always seek professional advice before considering insolvency, as this has far-reaching consequences.

What happens if I move abroad? Will the tax debts remain?

Tax debts do not simply disappear when you move abroad:

• Continued existenceThe debts remain and usually only become time-barred after many years.
• Enforcement abroadIn many countries, especially within the EU, the German tax office can have the debt enforced.
• Return: In the event of a later return to Germany, you will be left with the old debts plus interest.
• ConsequencesMoving abroad to avoid tax debts can be regarded as tax evasion and have legal consequences.