Five things to know as an independent contractor working in Philadelphia

Independent contractors in Philadelphia need to navigate a complex tax landscape to remain compliant with city regulations. The Business Income and Receipt Tax (BIRT) and the Net Profits Tax (NPT) are critical for self-employed individuals, with the BIRT based on gross receipts and net income from business activities, while the NPT is tied to net profits. Starting in Tax Year 2025, all businesses must file BIRT returns, eliminating the exemption previously granted to those with gross receipts under $100,000. Philadelphia updates its tax rates annually, typically in June, requiring contractors to stay informed about changes. The Philadelphia Tax Center provides tools and resources for tax filing and payment, including assistance for those facing tax debts.

Compliance with tax obligations is crucial for maintaining a Commercial Activity License, which is necessary for operating legally in the city. Contractors are advised to consult with tax professionals if unsure about their obligations. Failure to comply can lead to penalties and loss of business privileges.