City of Philadelphia offers some BIRT tax refunds to beleaguered business owners

In a move that could offer businesses some help deep in the pandemic, the City of Philadelphia has set up a process for companies to get their tax refunds months earlier.

For the first time, Philly businesses can apply now for refunds from the Department of Revenue by amending 2019 tax returns, rather than waiting until April 15 to submit tax returns.

“This is a great decision from the city,” said Kristin McCabe, manager at Brinker Simpson certified public accountants in Springfield, Delaware County. “This has never been done before, and specifically targets the businesses most impacted by the recently increased restrictions.” These include the full range of city businesses.

She’s advising clients to get in touch with their tax accountants as soon as possible to understand how they may be eligible.

The BIRT is Philadelphia’s most widely hated business tax.

Philly has the nation’s highest wage tax and stands alone in how it taxes business income. Of the nation’s 30 biggest cities, 11 impose a tax on either profits or revenue, according to a 2016 Pew report.

The city is alone in taxing both.

The city’s Business Income and Receipts Tax (BIRT) uniquely taxes both profits (6.25%) and sales (1.415% per $1,000), making it one of the most burdensome taxes. Businesses pay this levy even if they suffer losses because the city taxes every dollar, even before expenses.

Under this relief, the city will allow businesses to essentially ask for a refund of prepaid taxes, based on income from the prior year.

Money refunds, however, won’t arrive for six to eight weeks, according to the Department of Revenue’s statement.

To amend a 2019 BIRT return, contact your tax professional, or use the City of Philadelphia’s eFile/ePay website: https://ework.phila.gov/revenue. You’ll need your federal EIN or taxpayer number and Philadelphia tax account number, which should be on your last return.

First, McCabe said, “it’s critical the city process the refunds as quickly as possible.”

Second, she said, city relief programs have been overwhelmed.

“Handling the volume of need all at once has been a major issue of the relief programs at the local, state, and federal levels,” McCabe said, noting the city has warned that BIRT refunds filed on paper will be significantly delayed.

Technology problems have plagued the relief effort as well.

“We see significant and disproportionate e-file rejections for Philly BIRT returns due to the city not recognizing account numbers,” she added.

“Once you have an error, you can’t resubmit like you can with the state and IRS. I’d love to see the city put some effort into addressing this and making it as simple as possible for people to submit electronically.”

In 2019, Philadelphia Mayor Jim Kenney signed an ordinance that exempted businesses with less than $100,000 in city-based revenues from filing BIRT returns. The ordinance applied to tax year 2020 and thereafter.

Under the 2019 change, businesses still had to file a return, even if they didn’t have a tax liability. The new policy: they no longer have to file a return at all if they don’t have a liability.

For technical questions, businesses and accountants can contact revenuetaxadvisors@phila.gov. For payment plans and other questions, call 215-686-6600 or email revenue@phila.gov.