PHILADELPHIA, PA — Tax season in 2026 is shaping up to be a rude awakening for thousands of Philadelphia businesses that have never before had to file a city business tax return.
For the first time in more than a decade, all businesses operating in Philadelphia will be required to file a Business Income and Receipts Tax return, regardless of how little revenue they generate. The shift follows the end of the city’s long-standing $100,000 statutory BIRT exemption, a policy that shielded small firms from filing requirements until it was dismantled after a legal challenge in 2025.
City officials say the change represents one of the most significant local tax policy resets in years, particularly for sole proprietors, freelancers, and microbusinesses that previously fell below the filing threshold. Under the new rules, any business located in the city or conducting business within its borders must file a BIRT return and be prepared to pay any tax liability owed.
The City of Philadelphia has acknowledged the disruption the move may cause and has spent months preparing businesses for the transition. Working alongside the Department of Commerce, the city hosted multiple information sessions outlining what the end of the exemption means, where owners can find personalized assistance, and how to access free tax preparation services and financial support programs.
Notices explaining the changes were mailed to affected businesses and made available online in eight languages. Officials have emphasized that even businesses with no tax liability must still file a complete return to remain compliant and to preserve the ability to carry forward future losses.
To ease the transition, the city is offering one key reprieve: businesses filing BIRT for the first time in 2026 will not be required to make estimated tax payments until 2027. Additional details on estimated payments are available at https://www.phila.gov/2025-08-12-what-anyone-doing-business-in-philly-needs-to-know-about-estimated-tax-payments/.
City officials are urging businesses to prepare early by setting up accounts in the Philadelphia Tax Center, the city’s online tax portal used to file returns, manage payments, update account information, and select language preferences. Filing online, they say, reduces errors and speeds processing across devices.
Businesses are also being advised to keep detailed records of activity inside and outside city limits and to consult tax professionals about how the revised rules may affect their obligations. The Department of Commerce is offering free tax preparation services for businesses with less than $250,000 in annual sales.
Even companies operating at a loss are encouraged to file. Losses incurred in 2022 or later can be carried forward for up to 20 years and applied against future liabilities, with the Tax Center automatically tracking those amounts. Businesses operating solely within Philadelphia may use the streamlined BIRT-EZ form, though the city has eliminated the former no-tax-liability filing option.
Additional information on broader changes to Philadelphia’s tax structure is available at https://www.phila.gov/2025-07-22-key-philadelphia-tax-policy-changes-you-need-to-know-now/.
For many small businesses, the message is clear: the era of staying below the filing radar is over, and compliance with the city’s business tax system is now unavoidable as Philadelphia reshapes its local tax landscape.
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