Any individual, corporation, LLC, partnership, or association engaged in for-profit activity within the city of Philadelphia must file a Business Income & Receipts Tax (BIRT) return. Any individual or entity maintaining a Commercial Activity License (CAL), even if not actively engaged in business, must file a BIRT return.
Not all for-profit activity requires a BIRT return to be filed. For example, earning a wage or salary as an employee, activity that is considered a hobby, or the work of non-profit organizations does not fall under the meaning of the term "business". To see if a business is subject to BIRT, see the definition of "Business" in the BIRT Regulations.
The BIRT return can be e-filed with the PA return, or by itself, and it must be filed and paid by April 15 of each year. Additionally, with each filing an estimate of the following year’s BIRT must be paid in full, and the estimate is equal to the current year's tax liability.
To create a BIRT return for an individual in TaxSlayer Pro, from the Main Menu of the Pennsylvania return select:
- Miscellaneous Forms
- PA City Tax Return
- Philadelphia Business Income & Receipts Tax Return
- For MFJ returns, indicate who the return is for, whether the Primary Taxpayer or the Spouse. Separate BIRT returns can be created for each.
- Answer the question, "Is all business conducted or located within Philadelphia?". If Yes, the menus will be greatly simplified and a BIRT-EZ return will be created.
- Indicate the method of computing tax on net income, whether Method I (in accordance with accounting system) or Method II (as properly reported to the federal government). Method I tax computation will be done on Schedule A; Method II tax computation will be done on Schedule B.
- If the business hasn't yet gotten City Account Number, click the link to open your web browser to the City of Philadelphia website so the business can register for the number. This number is required to electronically file the BIRT return.
- Enter the City Account Number.
After these initial questions are answered, you will be taken to the Philadelphia BIRT Return menu. Because the BIRT return calculates tax only on Philadelphia business income and receipts, no information will pull into the return from either the federal return or the Pennsylvania return.
The Alternative Receipts Tax Computation is not available with BIRT-EZ returns since there is no income to be apportioned within and without the city. However, if all business is conducted in Philadelphia and the business wishes to use the Alternative Receipts Tax Computation method, answer No to the question regarding whether all business is conducted within Philadelphia. The software will provide the more involved BIRT long form menus, including the ability to enter the required information for the alternative computation.
Under the Additional Information menu you can correct any of your previous answers as well as
- indicate the Federal ID number, if there is one;
- indicate that the business terminated during the year;
- indicate that the return is an amended return;
- indicate if the address has changed from the last return;
- enter the taxpayer's e-mail address;
- indicate if the taxpayer is filing an extension.
The amount of tax due is based on a calculation of tax on both net income and on gross receipts. The amount of information to include will vary depending on whether or not all business is conducted in the city of Philadelphia. Note that receipts are always positive numbers.
BIRT-EZ (all business is in Philadelphia)
- Net Income Portion of Tax - Enter the net income or loss along with any loss carryforward.
- Gross Receipts Portion of Tax - Enter the amounts of different receipts on each line as appropriate.
- Net Income Portion of Tax - Enter the net income or loss. Also enter on the appropriate line
- Interest expense on government obligations
- Income from certain categories as specified in the menu
- Total nonbusiness income or loss
- The portion of nonbusiness income or loss allocable to Philadelphia
- Any loss carryforward
- Gross Receipts Portion of Tax - Enter on the appropriate line
- Gross receipts related to tangible personal property, dividends, interest, royalties, and gains on the sale of stocks, bonds, and capital assets
- Gross receipts from services
- Gross receipts from rentals
- Receipts from sales, services, and rentals outside Philadelphia
- Manufacturers, wholesalers, and retailers can elect to compute the gross receipts tax on those sales using the Alternative Receipts Tax Computation. Enter the required information under the menu line Receipts Computed by the Alternate Method.
Payments, Credits and Penalties
- (Prior year) Overpayments and (current year) BIRT Estimates/Extension - Enter on this line the total of last year's estimated payments plus any overpayments plus any payments made on extension.
- Credit from Special Credit Schedule (SC) - If the business has been approved for any city tax credits, enter the credit amount on the appropriate line. Each credit has its own regulations, including how the credit is calculated, carryforwards, and expiration. For more information about each credit, click here.
- Interest and Penalty - If the return is subject to interest and penalty due to late filing and/or late payment, enter the total penalty and interest here. For information about how to calculate interest and penalty, click here.
If the return results in an overpayment, you have the option to allocate some or all of it to the current year Net Profits Tax (NPT) or next year's BIRT.
Note: This is a guide on creating the Philadelphia Business Income & Receipts Tax Return in TaxSlayer Pro. It is not intended as tax advice. You are encouraged to review the information from the City of Philadelphia, as it is both complete and authoritative.