In the case of employees, the income tax payable on wages is levied by way of deduction from wages (wage tax). With the tax deduction, the taxation procedure is generally concluded, unless the employee is still obliged to carry out the assessment for income tax after the end of the calendar year or this is requested by the employee.
The employer is required to withhold wage tax each time it pays wages to its employees. The basis for the wage tax deduction are the individual wage tax deduction characteristics, which are permanently stored in a central database of the tax authorities (electronic wage tax deduction characteristics - ELStAM) and are made available to the employer for electronic retrieval. Stored are e.g. tax class, factor if applicable, number of child allowances, other allowances, but also the church tax characteristic.
Wage tax withheld in excess during the calendar year is refunded to the employee at the end of the year. This is done by way of (company) annual wage tax equalisation with the employer, which the employer must carry out in certain cases, and/or by way of an application assessment by the employee with the tax office (e.g. in order to have income-related expenses taken into account retrospectively).
In certain cases, an income tax assessment is also mandatory for employees to determine their annual tax liability. This applies in particular to cases in which the employee has also received other income or an allowance has been taken into account in the wage tax deduction procedure and the salary earned by the employee exceeds certain limits. In the assessment for income tax, too much tax withheld is also refunded, but also too little tax levied is claimed in arrears.