Based primarily on the final payment from the previous year, the Finanzamt (Tax Office) will evaluate your overall tax bill for the current year, including German income tax. They will then require prepayments, also known as Vorauszahlungen, paying a quarter of the tax amount on the 10th of March, June, September and December.
German Income Tax: Liability
Liability over the total tax amount, including German income tax is determined when an income tax return is filed, this includes all sources and all types of income. Wage tax is withheld and provisional payments are deducted from the total liable taxation amount, so a refund or final tax payment can be assessed. The tax assessment is typically supplied by the Finanzamt offices anywhere between 2 and 6 months after the tax return has been submitted and filed. No payment will be due before receipts of the tax assessment notice have been received.
Any tax return is subject to an audit, therefore if the assessment on your tax is issued but is not preliminary, the assessment can only be edited or amended in the potential future under the occurrence of extraordinary circumstances, such as being caught under tax evasion laws.
As a set rule, the return on income tax (the Einkommensteuererklärung) needs to be filed before the 31st of May in the year following the one where the income was actually received.
If you should choose to employ a tax consultant in relation to this matter, then you can claim an extension up until the 30th of September. There will be penalties imposed if the return is filed late.
There are a small number of situations where the taxpayer will be required to pay taxes even though the income total is less than the personal allowance, particularly when the income that is tax exempt, foreign sourced income for example, has to be considered in terms when distinguishing the income tax rate that will apply to individual circumstances. After this is determined, taxes, including German income tax are then assessed on a sliding scale basis.