I have been living in Zürich since Jan 2015 with my family. EU citizens, permit B. Therefore subject to withholding tax.

I just received a letter from the Kantonales Steueramt (Zürich) saying that my 2015 tax declaration cannot be accepted because in 2015 because tax filing can only be done by those that earn more than Fr. 120.000 per year ("...deren quellensteuerpflichtige Bruttoeinkünfte in einem Kalenderjahr mehr als Fr. 120000 betragen").

It seems that they will forward it to the Withholding tax office so that they can reassess my situation ("Wir werden eine Meldung an die Dienstabteilung Quellensteuer erstellen, damit diese eine Neuveranlagung der Quellensteuer prüfen kann.") Hopefully they want to consider Pillar 3 contributions and childcare costs.

HOWEVER, my wife salary was under 120.000 only because she started working in September. If you compute her gross salary pro-rata, it would be higher than Fr. 120.000. What should I do? Just accept their decision, especially given the fact they will apply a lower tax rate compared to Zürich? Notice however that because of the Pillar 3 and the childcare costs, I was expecting a tax refund. Will I get any money back, if I allow them to consider me "under 120.000"?

Cheers!

No, the deadline to claim a refund from tax-at-source for such exceptional items has already long passed - it's very short, you should have filed the necessary form (Antrag auf Neuveranlagung der Quellensteuer) by Mar 31

That's not what you want, the department for tax at source will reject the request simply because the deadline has long passed. What you need to do is argue with them that you qualify for "nachträgliche ordentliche Veranlagung" based on pro-rata rule

That's what I suspected. So you think that even if they explicitly wrote
"Wir werden eine Meldung an die Dienstabteilung Quellensteuer erstellen, damit diese eine Neuveranlagung der Quellensteuer prüfen kann."
in the letter, they are not going to grant a (2-year!) extension?

Easier said than done
One year ago they already returned by tax forms, saying that we didn't earn more than 120.000. We went to the tax office in person, talked to an employee. She fetched our forms, we showed her the mistake, she called someone, and she said that we were right, they are going to process it. And now we are back to square 1...

I had an email exchange with the responsible person at the Zurich tax office, and I received a sensible explanation, so I would like to share it here in case others are interested.

The pro-rata rule only applies in case your tax liability is less than one year. So if you move to Switzerland in the middle of the year and start your job, your yearly income would be computed pro-rata in order to determine if you have to file taxes or not (based on a Fr. 120'000 threshold).

However, as we moved in January, we are liable for taxes for the entire year, and no pro-rata rule is applied. The 120'000 rule is applied to the gross income as it is.

Hope it helps.

Cheers!