Tax recognition of a third degree program
June 12, 2011 | 50,00 EUR | answered by StB Manuela Ponikwar
My wife completed her training (first degree) as a Dipl.-Verwaltungswirtin at the Federal University of Public Administration in 1987 and has a corresponding position as a civil servant in the higher service.
With the goal of obtaining a position as a senior civil servant (higher service) at her current employer, she pursued a part-time second degree (2006 - 2008) at the Technical University of Kaiserslautern as a distance learning program and obtained a Master of Arts degree in the field of Social Sciences. The costs of this distance learning program were recognized by the tax office.
Subsequently, it was found that the qualification obtained by the employer falls under the higher-level field of "language and cultural scientific service", which is not established in my wife's office and will not be established, resulting in no possibility for advancement to the higher service there.
In order to still meet the requirements for transferring to the higher service, my wife started another part-time study program at the University of Kassel since last fall. This Master's program (Master of Public Administration) is recognized by the employer and fulfills the requirements for entry into the higher service of the Federal Administration (BMI department).
However, as is the case with all administrations, demonstrating the appropriate qualification does not automatically guarantee obtaining a position. There must be suitable vacancies available and a successful application process must be completed before a position is filled. This is of course not foreseeable at this time. There is no entitlement to a position.
In the tax assessment for 2010, the tax office only provisionally recognized this study with the following wording: "The decision is made provisionally according to §165 (1) sentence 1 AO regarding the wife's expenses for training costs (third degree), as it is currently not foreseeable whether higher income will be generated through the training. This position is based on the expenses for a second degree that were already requested in 2007, as no higher income has been generated even after completing the studies. (The question of whether the study secures income does not arise, as the taxpayer already has a secure income solely through her civil servant status)."
I have not found any indication that a study is only recognized if it will surely lead to an increase in income. Does the provisional recognition mean that if my wife does not receive a position in the higher service after completing the study, the tax office will reclaim all study costs recognized over the course of the study period?
Do I need to take action in the form of filing a complaint now, or is this only necessary if the tax office requests repayment after the completion of the study?
PS: I have attached the justification for the study and the costs incurred in 2010 as submitted to the tax office. (The home office expenses were recognized except for maintenance expenses)
Dear inquirer,
thank you for your inquiry, which I would like to answer within the scope of an initial consultation, taking into account the appropriate fee, as follows:
In principle, the costs for a second or further education can be recognized as advertising expenses as far as they are professionally motivated and are in a sufficiently concrete, objectively determinable connection with future taxable income from the desired professional activity (LStR R9.2 Abs. 1).
The tax office's argument is that a professional motivation can exist for two reasons ("income-related motivation context"):
1) Securing the job or income
2) Improving the job or income
The first point is not relevant to your wife due to her civil servant status, so a connection between the expenses for the study and the future taxable income needs to be demonstrated.
If the tax office has difficulties in determining a situation, they can use the option of a provisional tax assessment "due to uncertain facts" - as in your case. This was mainly done due to your unfavorable previous history.
You cannot file an objection or other legal remedy against the provisional nature of the tax assessment. The tax assessment must rather be corrected or declared final by the tax office once the uncertainty has been eliminated.
However, you can proactively contribute to this:
The taxpayer bears the burden of proof for the existence of advertising expenses and must generally present the facts. I assume that your explanation regarding the study did not sufficiently depict the connection to potential career advancement and the realistic chances thereof.
The deduction of expenses as advertising costs requires that at the time of expenditure, a connection with future taxable income can be objectively determined based on objective circumstances (e.g. BFH judgment of 26.1.2005 VI R 71/03).
The BFH judgment also strongly refers to the reasoning of the preceding FG decision (FG Saarland of 19.3.2002 - 2K 138/98). Essentially, it is emphasized here that further education costs must serve to "move forward" in the profession or "aim" to reach a certain position. Actual achievement of the goal is not explicitly required.
I recommend that you request a revocation of the provisional nature with reference to these judgments and objective evidence (e.g. proof of recognition of the study by the employer, confirmation from the boss about currently available positions, documentation of internal personnel planning, possibly email correspondence about opportunities in the application process, to name just a few possible approaches).
Speak directly to your case worker about which evidence would help them. Often direct contact and open conversation are much more effective.
If the tax office declares the notice to your disadvantage as final, you can lodge an objection within one month. In this case, evidence would be necessary to show that your wife has actually made efforts or is still making efforts to obtain a position in the higher service.
If an approach as advertising costs should not be final and justified, the costs for the study can be claimed as special expenses for your own vocational training up to a maximum of 4,000 EUR per year (per person).
I hope my explanations have been helpful to you.
Yours sincerely,
Manuela Ponikwar
Tax consultant
www.ponikwar.de
