I have an irritating freelance issue and I want to make sure I handle it correctly on my end. In 2025, a client didn't pay one of my invoices in full, and after a lot of back and forth, agreed they needed to correct it, and then instead of paying me the difference owed, paid out the whole invoice in full. I let them know right away. They got back to me this year and instead of me transferring back the extra payment, told me they wanted to just take the balance out of my next invoices for them.
How do I go about declaring this correctly on my taxes? Should I go by the "Zuflussprinzip" and include the "extra" payment I received in 2025's declaration? Or, since that money is technically being applied to work I've now done in 2026, should I include it on 2026's taxes? I know it would be easiest to ask an accountant, but I usually do my own taxes, which are not typically this much of a headache. So if anyone has any insight into this, it would be most appreciated!
How to handle payment issue on taxes
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booksnthings
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Eric7
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Re: How to handle payment issue on taxes
There's a good chance that Panda will correct me, but...
...as a freelancer, the date of payment is relevant so the full amount paid would be declared in 2025.
You should have 2 invoices though IMO. One for the full amount and one for the reduced amount initially paid.
Or if they were paid with the same bank reference (Verwendungszweck) then one big invoice for the total amount paid.
If you were a GmbH, you declare the money as earned as soon as the invoice is sent.
...as a freelancer, the date of payment is relevant so the full amount paid would be declared in 2025.
You should have 2 invoices though IMO. One for the full amount and one for the reduced amount initially paid.
Or if they were paid with the same bank reference (Verwendungszweck) then one big invoice for the total amount paid.
If you were a GmbH, you declare the money as earned as soon as the invoice is sent.
When the seagulls follow the trawler, it's because they think sardines will be thrown into the sea.
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PandaMunich
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Re: How to handle payment issue on taxes
Yes.booksnthings wrote: ↑Mon Mar 16, 2026 2:55 pm Should I go by the "Zuflussprinzip" and include the "extra" payment I received in 2025's declaration?
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booksnthings
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Re: How to handle payment issue on taxes
Thank you, Eric7 and PandaMunich for responding. It really helps. I have one more question, if that's ok:
The incorrectly paid invoice was incorrect because it was missing the VAT. When they corrected it, they paid the whole thing, plus the VAT. I do an annual VAT declaration (other clients are mostly outside Germany, so I don't collect enough VAT for a quarterly or monthly filing to be required). Since the second round of payment made in 2025 is technically being applied to my current, 2026 invoices + VAT, how would I handle the VAT portion to make sure it's reported correctly between what was paid in 2025 and what is being invoiced for now? Sorry, this is really giving me a headache.
The incorrectly paid invoice was incorrect because it was missing the VAT. When they corrected it, they paid the whole thing, plus the VAT. I do an annual VAT declaration (other clients are mostly outside Germany, so I don't collect enough VAT for a quarterly or monthly filing to be required). Since the second round of payment made in 2025 is technically being applied to my current, 2026 invoices + VAT, how would I handle the VAT portion to make sure it's reported correctly between what was paid in 2025 and what is being invoiced for now? Sorry, this is really giving me a headache.
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PandaMunich
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Re: How to handle payment issue on taxes
If you always declare things as they really happened.
If, for example, the client paid 1,000€ of a 1,190€ invoice in 2025, then the 2025 net turnover is 1,000/1.19 = 840.34€ and the VAT on it 159.66€ (= 1,000€ - 840.34€).
If in 2026, they by mistake paid you 1,190€, then you have no choice but to report the reality, i.e. you have 1,000€ as 2026 net turnover and 190€ as 2026 VAT.
If, for example, the client paid 1,000€ of a 1,190€ invoice in 2025, then the 2025 net turnover is 1,000/1.19 = 840.34€ and the VAT on it 159.66€ (= 1,000€ - 840.34€).
If in 2026, they by mistake paid you 1,190€, then you have no choice but to report the reality, i.e. you have 1,000€ as 2026 net turnover and 190€ as 2026 VAT.