Philadelphia business owners now have an easier way to manage taxes during tax season, especially those dealing with net operating losses. The City allows businesses to carry forward losses incurred in 2022 and beyond for up to 20 years. This update, shared on the Philadelphia government website, provides relief by helping businesses manage future tax liabilities and simplifies the process of documenting operating losses online.
Navigating tax codes can be complex, but the process in the City of Philadelphia is straightforward. If a business experienced a loss in 2024, that loss can reduce taxable net income in future years. The online service from the Philadelphia Tax Center automates the documentation and carry-forward of losses from different tax periods, making the process easier.
For example, if a business had a $100,000 loss in 2023 and a taxable income of $50,000 in 2024, that loss would reduce the taxable income to zero. The remaining $50,000 can then be carried forward to offset income in future years. In 2025, if the business earns $75,000, the $50,000 from 2023 could be used to lower the taxable income to $25,000.
To benefit from this, businesses must document their loss carry-forwards by filing a complete Business Income & Receipts Tax (BIRT) return. Even if they are not required to, this is the only way to record the losses in the system. The Philadelphia Tax Center’s online platform makes it easy to view and document these losses, and it can be accessed from a phone or tablet.
The Philadelphia Tax Center provides a simple guide: log in, select your BIRT account, file a complete return, and enter your liability amount. To view historical carry-forward amounts, users can click the Loss Carry Forward hyperlink in their BIRT account. This streamlined process helps business owners manage their tax filings.
Philadelphia's Business Income & Receipts Tax (BIRT) is applied to gross receipts and taxable net income, with a current net income tax rate of 5.81%. For more assistance or information, businesses can call (215) 686-6600 or visit the City of Philadelphia’s website for further details on the BIRT.
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