II. Tax return

You can document your income and expenses for the tax return in a number of ways.

1. **Save receipts and other records:** Keep all receipts and similar documents for your expenses and income in a safe place. This includes, for instance, till receipts for cosmetics, invoices for lingerie, bank statements and all other documents that are proof of your financial transactions.

2. **Keep a ledger or Excel spreadsheet:** You can keep a basic ledger or Excel spreadsheet to record your income and expenses. Create separate categories for different types of expenses, such as rent, work supplies, travel expenses etc., and update your records regularly. 

Here is an example of the documentation “Income - surplus statement”: Einnahmen Ausgaben-Muster_9.pdf

and an Excel spreadsheet: Tabelle zum ausfüllen Einnahmen-Ausgaben_7.ods

If the tax office decides to check your records, you may have to present the documentation for your income and expenses.

3. **Use accounting software:** There are special accounting software programs that can help you to manage your finances and prepare your tax return. These programs automate many of the processes and can save you time.

4. **Separate bank accounts:** Use separate bank accounts for business and personal expenses. This will make your bookkeeping easier because you will have all your business transactions in one place.

5. **Record cash transactions:** Do not forget to keep records of cash transactions as well. You can keep a cash ledger to keep track of what you've spent cash on or when you have been paid in cash.

6. **Observe the deadlines:** Please keep to the deadlines for filing your tax return and submitting the required documents. This will prevent delays and possible penalties.

The exact documentation requirements may vary, depending on your particular situation and your local tax laws. It’s a good idea to check the specific requirements in your area with your local tax authorities or a tax accountant to make sure you're documenting everything correctly.

If you are self-employed, you have to start paying VAT once you are earning more than 22,000 euros a year. VAT, sometimes also known as “sales tax”, is currently 19%.

Here’s an example: If you earn 23,000 euros in the whole year, you will have to pay 19% VAT to the tax office, which is 4,370 euros for the entire year.

If you earned less than 22,000 euros last year and aren’t expecting to earn more than 50,000 euros this year, then you will be considered a small business owner and will not have to pay VAT. However, you will then also not be permitted to charge other people VAT, for instance on your own invoices.

If you earn more than 24,500 euros a year you will also have to pay business tax.

If you're self-employed, you’ll need to file a tax return. You submit the tax return to the relevant tax office. It is generally advisable to seek help from a tax accountant.

To do so, you complete the respective forms and give them to the tax office. Nowadays this can be done online using the Elster portal (see question 6).

The forms for the tax return are available from the tax office or from:

https://www.elster.de/eportal/formulare-leistungen/alleformulare

It is generally advisable to seek help from a tax accountant.

ELSTER is an online system in Germany that allows you to file your tax return online. Instead of using paper forms, you can send your tax information straight to the tax office. It’s easier and faster.

You can use ELSTER to:

1. Complete and file your tax return online.
 

2. Safely send your tax information to the tax office.

3. Upload electronic receipts and documents.

4. Receive tax assessments online.

5. Deal with your taxes safely and securely online.

To use Elster, you must first register online and use electronic signatures or certificates to ensure that your information is protected and genuine. ELSTER makes dealing with tax matters easier and more convenient. 

“Tax deductible” means that the expenses you declared in your tax return will be deducted from your annual income. You will then have to pay tax on the amount that remains. In other words, spending reduces your taxable income, which means you pay less tax. This is often used to reduce tax liability and to take advantage of legal ways to reduce taxes.

Every year: an income tax return (by July 31 of the following year) and possibly an annual VAT return (but only if you are not a small business owner).

Every month: a VAT advance return. If the VAT for the previous calendar year is more than 7,500 euros, then the individual is obliged to submit monthly advance returns.

If there's anything you're not sure about, then it's a good idea to ask a tax accountant or your local tax office for help.

If you don’t file your tax return, the tax office will estimate your financial situation. This means they will use averages and estimates to calculate how much profit you’ve made and what your turnover was. These estimates may well be higher than what you actually earned.

It’s important that you file your tax return because it’s in your own best interest. If you don’t, you could end up paying more tax than you actually have to. Filing a proper tax return will help to ensure that you only pay the taxes you actually owe.

You will also have to present a tax return in some situations, such as:
 

- **Health insurance: **If you want to join a public health insurance scheme, you will have to provide evidence of your income so the amount of your contribution can be calculated. If you are working as a self-employed prostitute, you can provide confirmation of your income on your tax return. If you do not have evidence of your income, you may not be covered by the statutory health insurance, or only at the maximum rate, which is very expensive.

- **Tax audits:** Sometimes the tax office will check your tax return. You will then have to show that what you have declared is true. This includes items such as income, expenses, and receipts for certain deductions.

- **Loan applications:** Often, if you want to borrow money from a bank, the bank will ask to see your tax return. This helps the bank to understand how much money you're making and how safe it is to lend you money.

- **Social security benefits:** If you want to ask for money or support from the state, the office may ask to see your tax return. They want to know how much money you have in order to decide whether you need support.

- **Visa applications:** If you want to travel to another country, that country may ask to see your tax return. They want to make sure you have enough money to live there.

- **Business expenses:** If you have your own business, you’ll need to present your tax return to prove how much money your business is making and spending. This may be important if you want to take out any loans or have legal problems.

- **Pension rights:** If you want to retire, the pension office may ask to see your tax return. They want to see how much money you earned while you were working.

- **Scholarships and student loans:** If you want a scholarship or money for your studies, you may have to show your tax return. This will show how much support you really need.

It's really important that you keep all papers and receipts related to your tax return in a safe place. You might need them later on to prove that you told the truth. If you're not sure what to do, it’s best to ask your tax office or a tax accountant. They can help you to present the right paperwork.