Philadelphia is working to be a city where entrepreneurs thrive and innovation abounds. Success depends on a lot of things, including knowing local business taxes.
Some Philadelphia taxes only impact certain kinds of companies, like the Liquor or Parking taxes. On the other hand, the Business Income & Receipts Tax (BIRT) affects all incorporated and non-incorporated businesses in the city.
All non-incorporated businesses people, from a new freelancer to an LLC veteran, need to be aware of one other: the Net Profits Tax (NPT).
Below are 10 things that any small business should know about BIRT and NPT.
Tax situations are unique to each business, even small ones. So, while we hope you find this list helpful, it can’t replace specialized advice from a tax professional.
10. Both BIRT and NPT are due April 15 of each year for business activity in the prior year. BIRT estimated tax for the current year is 100% percent of your prior year’s BIRT liability, and due April 15. NPT payments for the current year’s estimated tax are due twice per year: April 15 and June 15.
9. If all your business is done in Philly, you should use our BIRT EZ form. Save yourself time and ink. Find it under our Tax forms webpage.
8. The rates for BIRT and NPT change from time to time, and NPT rates differ between residents and non-residents. Check online for the current tax rates.
7. You can take an exclusion of the first $100,000 of your gross receipts, as well as the net income attributed to that amount, when you file and pay your BIRT return. Around 60,000 businesses in Philadelphia don’t have BIRT liability.
6. NPT is paid by any business that is not a corporation: Sole proprietors, partnerships, associations, LLCs, estates or trusts. Basically, it’s like the Wage Tax, which all Philadelphia workers pay on our earned income.
5. If you are not incorporated, but made enough money to be liable for BIRT, you get a credit toward NPT. The NPT credit is equal to 60% of the BIRT paid on your net income portion of the tax.
4. Don’t use previous-year forms to file BIRT or NPT returns. The best way to avoid this mistake is to file electronically. If you prefer to paper file, get current-year tax forms from our website.
3. If you just figured out you owe money for previous years, don’t freak out. Contact the Department of Revenue before we come find you. If you do so, we’ll waive some penalties. Payment plans for back business taxes are also available.
2. You must file BIRT and NPT returns even if your business has an overall loss and no tax is due.
1. You can file and pay BIRT and NPT online. It’s fast and convenient. In fact, you are required to pay BIRT and NPT electronically if you owe more than $5,000. Filing paper returns is acceptable if you owe more than $5,000.
BONUS: We covered many of these points in a recent video collaboration with the Philadelphia Department of Commerce. Watch that video below!
Photo credit: Josh Hallett/Flickr