Einkommensteuer-Vorauszahlung anpassen: mehr Liquidität nach § 37 EStG

The next income tax prepayment is due on 10 September – calculated on the basis of a year that may have nothing to do with your current order book. If business is worse than back then, you are lending the tax office money you need right now, interest-free. If it is better, a back payment is quietly building up. Section 37 of the German Income Tax Act (EStG) allows adjustments in both directions, informally and free of charge. Here is how to do it.

How the tax office calculates your prepayment

Income tax is only assessed after the year has ended. So that the state does not have to wait a year and a half for its money, Section 37 (1) EStG requires quarterly prepayments on four fixed dates:

• 10 March
• 10 June
• 10 September
• 10 December

The amount is based in principle on the income tax resulting from the most recent assessment after crediting withholding amounts (Section 37 (3) sentence 2 EStG). In other words, the tax office looks backwards – at the most recently processed tax assessment.

An example: if the tax office processes your 2024 return in early 2026 and assesses income tax of 9,600 euros, the prepayments come to 2,400 euros per quarter. Whether 2026 actually looks like 2024 is irrelevant to that automatism.

The de minimis thresholds

Prepayments are only assessed if they amount to at least 400 euros per calendar year and at least 100 euros per payment date (Section 37 (5) EStG). Anyone below that pays only upon assessment. A subsequent increase of prepayments already assessed likewise requires at least 100 euros per date.

Applying for a reduction: when it pays off

Under Section 37 (3) sentence 3 EStG, the tax office may adjust prepayments to the income tax expected for the assessment period – up to the end of the 15th calendar month following that period. For 2026, you can therefore still obtain an adjustment until the end of March 2028. In practice, of course, you file the application as soon as it becomes clear that things are turning out differently.

Typical reasons for a reduction:

• A major client or retainer has been lost and revenue will predictably fall.
• Illness, parental leave or a deliberate reduction in working hours.
• A one-off effect in the previous year – a business sale, a severance payment, an unusually large project – that will not repeat.
• Larger investments with high depreciation volume, for instance via declining-balance depreciation or the investment deduction under Section 7g EStG.
• A change of business model with a significantly lower profit.

Important: the prepayment is based on profit, not revenue. A drop in revenue accompanied by lower costs does not automatically justify a reduction. Argue with the expected tax, not with the order book alone.

How to word the application

The application is informal. It needs no template and no adviser – but it does need three things: your tax number and the assessment period, the new amount you are asking for, and a plausible justification. This structure works well in practice:

1. Subject: "Application for a reduction of income tax prepayments 2026 pursuant to Section 37 (3) sentence 3 EStG", plus your tax number.
2. Request: to reduce the prepayments from date X to Y euros per quarter.
3. Justification: what has happened, and what profit is expected for the current year – compared with the figure the assessment is based on.
4. Evidence: attach a current management report or interim cash-basis income statement. This is what speeds up processing.

You can file via Mein ELSTER ("other message to the tax office") or by post. Electronic filing is faster and leaves a record.

The reverse case: increasing voluntarily

If your profit is well above the previous year, a back payment is quietly building up – often only visible when the assessment arrives two years later. You can then have your prepayments increased voluntarily. Two arguments in favour:

• Cash flow. Four instalments are easier to carry than a five-figure back payment.
• Interest. Under Section 233a of the Fiscal Code, interest on a back payment starts after a grace period of 15 months from the end of the tax year. For 2026, that means from 1 April 2028.

What interest currently costs – and what is set to change

Under Section 238 (1a) of the Fiscal Code, the rate for interest on back payments and refunds is 0.15 per cent per full month, i.e. 1.8 per cent per year. This has applied since the 2022 reform, after the Federal Constitutional Court struck down the old rate of 6 per cent per year for interest periods from 2019 onwards.

That is set to change: the government draft of the Annual Tax Act 2026, adopted by the federal cabinet on 12 August 2026, provides for 0.3 per cent per full month and thus 3.6 per cent per year from 2027 – a doubling. It has not been enacted yet; the Bundestag and Bundesrat still have to approve it. You will find the details in our article on the Annual Tax Act 2026.

Do the maths instead of deciding by rule of thumb: as long as the grace period runs, a later back payment costs nothing. If you can park the reserve safely, low prepayments work well. If experience shows you tend to spend the reserve elsewhere, higher prepayments serve you better.

What happens if you skip an instalment

Simply letting a prepayment lapse is the most expensive option. Under Section 240 of the Fiscal Code, a late payment penalty of 1 per cent per commenced month applies, calculated on the outstanding amount rounded down to the nearest 50 euros. On a 2,400-euro instalment that is 24 euros per month – on top of reminders and possible enforcement.

If it is foreseeable that you cannot pay, there are two clean routes: an application for reduction if your profit really is lower, or an application for deferral under Section 222 of the Fiscal Code if it is purely a liquidity squeeze. Either is better than letting the deadline pass.

Don't forget trade tax

If you carry on a commercial business, a second prepayment procedure runs in parallel – with your municipality. Under Section 19 of the Trade Tax Act, trade tax prepayments are due on 15 February, 15 May, 15 August and 15 November, each amounting to a quarter of the tax from the most recent assessment. An adjustment to the expected tax is possible here too.

Crucially: the tax office does not inform the municipality automatically. If you have your income tax prepayment reduced, file the same application with the municipality in parallel, using the same justification.

Your checklist before the next due date

1. Pull current interim figures: where does profit stand today, extrapolated to the full year?
2. Compare with the prepayment assessment. If the forecast deviates by more than roughly 20 per cent, an application is worthwhile.
3. File the application with justification and interim figures via Mein ELSTER – ideally two to four weeks before the due date.
4. If you run a commercial business: have the trade tax prepayment adjusted with the municipality in parallel.
5. If profit is rising: build a reserve or apply for a voluntary increase.

We keep an eye on your figures

The reason so many self-employed people pay too much or too little in advance is simple: they do not know their current profit. Ongoing bookkeeping changes exactly that. At Buchführungsheld, real bookkeepers post your receipts monthly, you can see where you stand at any time – and we get in touch when adjusting your prepayments makes sense. At a fixed price, without timesheets. Want to see how that would look for you? Book a free preliminary consultation.

Frequently asked questions

Can I have the prepayment reduced to zero?

Yes, if no income tax is expected for the current year – for example in the case of a loss. The tax office usually requires a plausible forecast, such as current interim figures with a brief explanation of the causes.

How long does it take to process a reduction application?

That depends on the tax office; a few weeks is typical. File in good time before the next due date. Amounts already paid are offset against future instalments or refunded when a reduction is granted.

Until when can an adjustment be made at all?

Under Section 37 (3) sentence 3 EStG, until the end of the 15th calendar month following the assessment period. For 2026, that period therefore ends on 31 March 2028.

Do I have to have my prepayment adjusted if I earn more?

There is no obligation to do so. However, the tax office may increase prepayments on its own initiative if it learns of higher income. Increasing voluntarily protects you from a large back payment and from interest once the grace period ends.

What is the difference from the VAT prepayment?

The VAT return reports the VAT actually incurred in a month or quarter – there is nothing to estimate. The income tax prepayment, by contrast, is an instalment on an annual tax that is only determined later. You will find more on the former in our article on the VAT return.