Why are you interested in the tax?
Where do I have to state the overtime in the tax return?
Overtime must always be paid. The amount is usually regulated by the employment or collective bargaining agreement or a works agreement. But even if such a regulation does not exist, you have a right to remuneration in accordance with Section 612 of the German Civil Code (BGB) if this is customary in the company or in the industry - unless you are a managerial employee.
According to the law, overtime is normal working hours. They are usually remunerated in the same way. Sometimes the employer also pays bonuses (usually calculated as a percentage) if this is stipulated in the employment or collective bargaining agreement or the works agreement. The catch is: The overtime and possible surcharges must be taxed as well as the wages. Tax allowances only apply in certain cases, such as night work or work on Sundays and public holidays, so that they are at least partially tax-exempt.
What does this mean for the indication of overtime in the tax return?
Since overtime is treated like regular wages for tax purposes, it means that your annual earnings increase and you therefore have to pay higher taxes. In addition, your employer must also pay social security contributions on the overtime paid. Conclusion: your net wage will decrease.
In the tax return, overtime is therefore not shown separately, but added to the regular annual earnings. Anyone who has paid too much tax due to irregular overtime (which is usually the case) can and should have this refunded by filing a tax return.
If overtime pay is only paid after the employment relationship has ended, the amount may be taxed as “other income”.
Fifth rule possible
Due to the progressive tax rate, adding overtime to the regular annual salary can lead to an extremely high tax burden. You may be able to avoid this by having overtime paid for several years (at least two). In this case, according to a judgment of the Münster Finance Court (FG Münster, judgment of 23.05.2019, Az. 3 K 1007/18), the so-called fifth rule can be applied, as well as for postpaid wages. This means that taxes are initially calculated on one fifth of the wage, which is allotted to all overtime. The amount calculated in this way is then multiplied by five again to determine the total tax amount for overtime. However, the Federal Fiscal Court has not yet ruled on this issue. You must apply to the tax office to apply the fifth rule.
But be careful: If you do not make your overtime payment claims in time, they will expire! Read our tip "When do overtime hours expire?"
How can I avoid tax disadvantages?
If the regulations in the employment or collective bargaining agreement or the works agreement allow it, you would do well not to have your overtime paid out to you, but to choose another alternative: time off or setting up a lifetime working time account that you can use later when you retire can. If the employer transfers the wages for the overtime to this account, this has the advantage that all incoming payments are tax and social security-free.
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