Kensington Accounting

05/29/2026

If you are a small business owner or self employed in Philadelphia and this was your first year paying the BIRT tax, be careful.

The City of Philadelphia Government is sending incorrect tax bills for the NPT return claiming $0 for the 60% credit of the Net Income portion on the Business Income and Receipts Tax that you paid.

Several clients have come in with letters where the city is trying to double charge for this credit and so far, the city refuses to accept that the bill is an error at all.

The math behind it:
BIRT has a tax of 5.71% on Net Income
The NPT rate for Net Income is 3.74%
and the meager 60% credit on the NPT return for what you've already paid in BIRT ends up as 3.426%
Meaning the remaining tax on NPT should just be 0.314%

However these letters sent by the Philadelphia Department of Revenue are not giving taxpayers that credit of 3.426% on their Net Profits Tax returns.

DO NOT pay the bill until you've checked with a tax professional.

Philadelphia Inquirer Philadelphia Department of Commerce Small Business Saturday Philadelphia

05/20/2026

Continuing the series of historic taxes disproportionately levied on the working class that led to civil unrest, rebellion or absolute urban decay. Part 3 of as many as it takes until self-employed and freelance individuals are fully exempt from the dual mandate of BIRT & NPT or Mayor Parker and the rest of the city council resign for taxing the working class into forced poverty.

Over the course of history, what people remember from revolutions are the deaths, bloody battles, and stories of the victors. What is talked about less often are the tax policies that led to revolution. For this post I focus on the events that lead up to 1790s France and the taxing policy that caused the French Revolution.

France had a three-estate system: The Clergy, The Nobility, and the commoners (95% of the population). The first estate, The Clergy, were exempt from taxes. In Philadelphia today we have the same exemption to religious organizations, but that exemption has also been passed to universities and hospitals. This group of people collect massive amounts of wealth (tithes for the religious groups, tuition and grants for universities, and premiums, copays, and insurance payments for hospitals). Today massive amounts of funds pass through these entities every year, but for all intents and purposes they remain tax exempt.

The French Nobility were also exempt from paying direct taxes through privileges and royal favor. The same thing happens today where large corporations like Walmart, Amazon, Meta, Alphabet, and Tesla earn billions of dollars a year from the people in Philadelphia, but through special agreements and tax sheltered systems they pay very little tax to the city. For example, a company that is domesticated in a state like Texas does NOT pay income taxes at all. They might have to pay the city’s gross receipt tax of 0.141% (WHICH THE CITY IS TRYING TO GET RID OF BY 2039 under their new BIRT plan), but otherwise show little to no income generated in the city to avoid the massive BIRT & NPT requirement.

The last groups, the commoners, made up over 95% of France’s populations. They carried the entire tax burden of the kingdom. They had to pay a taille on property or income, a capitation as a general tax per capita, a vingtieme 5% tax on income, a gabelle tax on salt (no different than the sugar tax), and traites for customs and duties.

What caused the French Revolution was a frivolous expense account by the French Crown paired with the military involvement in the American Revolution leaving the country with a massive deficit that they tried to close by finally taxing the privileged classes which led to the exposure of the unjust taxing system and ultimately complete revolt.

Again, the ask here is simple, don’t be like 1700s France and give preferential treatment to The Clergy and The Nobility at the expense of the commoners. A BIRT system that taxes $6008 on small businesses that only make $50,000/yr will absolutely lead to urban decay and destruction of the hard work that many businesses have put into the city. Instead, tax the companies that provide the city no economic value through an expansion of the Gross Receipts portion of the tax. Move Federally exempt, disregarded entities like single member LLCs, independent contractors and sole proprietors to the Philly Wage and ONLY the Philly Wage so they have some parity with their W-2 counterparts, but increase the tax on the faceless and nameless C-Corps and S-Corps that use tax law and tax shelters to avoid any tax burden within the city.

Attached to this post is a tax breakdown under the proposed BIRT law that will go into full effect for tax year 2027 compared to the burden that a W-2 employee will face. For all intents and purposed it's assumed that once the 2039 plan goes into effect most DJIA, Mag 7, and other faceless organizations that carefully craft their tax liability will pay the city $0 without the gross receipts tax.

Philadelphia Department of Commerce Philadelphia Inquirer City of Philadelphia Government Small Business Saturday Philadelphia Freelancers Union

04/28/2026

Continuing the series of historic taxes disproportionately levied on the working class that led to civil unrest, rebellion or absolute urban decay (part 2 of as many as it takes until self-employed and freelance individuals are fully exempt from the dual mandate of BIRT & NPT).

The Byzantine Empire: This is one of the longest lasting empires in written history, so I’ll cherry pick a few good taxes from emperors during that time and revisit some of their laws in depth if the city continues to drag its feet on this antiquated BIRT requirement for working class individuals that don't even file a Federal Business Return.

“The unfavourable economic situation of large part of the population in late antiquity was to some extent connected with the taxation system” (Hunger, 205). One of the taxes that was considered unfavorable was the “chrysargyron” which was a tax for generations that had been a burden for small business owners and craftspeople. However, around the year 500, Emperor Anastasios I did recognize the detrimental impacts of the tax and abolished it. The empire went on to last another ~ 950 years.

Another issue faced by the Byzantium taxing system was “exkuseia” which were “fiscal and judicial immunities that the imperial government often granted, especially to monasteries” (Charanis, 419). Not dissimilar to the city’s preferential tax treatment toward universities, hospitals and most recently venture capital backed real estate developers looking for 10-year tax abatements. The exkuseia were noted to weaken the central government and give rise to wealth inequality between the working class and the lay aristocracy. That paired with the shift from peasant farmers to aristocratic feudalism ultimately destroyed the taxable base for the Byzantine Empire in the 10th – 12th centuries. The loss of a strong working class coupled with pressure from foreign invaders started a downward trend toward the end of the empire in 1453.

During a period of tax reform away from the lavish aristocracy to more democratic model, Emperor Romanus Lecapenus wrote “It is not through hatred and envy of the rich that we take these measures, but for the protection of the small and the safety of the empire as a whole… The extension of the power of the strong… will bring about the irreparable loss of the public good, if the present law does not bring a check to it. For it is the many, settled on the land, who provide for the general needs, who pay the taxes and furnish the army with its recruits. Everything falls when the many are wanting” (Charanis, 416).

The ask is simple… Individuals that file a Schedule C on their Federal 1040 have no business (pun intended) on the Philadelphia BIRT return. People make mistakes, but even in the year 500 they were grown up and intellectual enough to admit that mistake and stop a regressive tax on small businesses and craftspeople that helped an empire flourish for another 950 years.

Philadelphia Inquirer Philadelphia Department of Commerce City of Philadelphia Government Small Business Saturday Philadelphia

Sources:
Economic Factors in the Decline of the Byzantine Empire – Peter Charanis
State and Society in Byzantium – H. Hunger
State, Feudal, and Private Economy in Byzantium – Alexander Kazhdan
An Introduction to Byzantine Monasticism – Alice-Mary Talbot

04/25/2026

Starting a series of historic taxes disproportionately levied on the working class that led to civil unrest, rebellion or absolute urban decay (part 1 of as many as it takes until the BIRT law is reversed or self employed and freelance individuals are fully exempt from the dual mandate of BIRT & NPT)

Whiskey Tax (1791): Alexander Hamilton’s tax on distilled spirits disproportionately affected working-class farmers in Western Pennsylvania as it impacted the demand for grain, leading to the Whiskey Rebellion. The Whiskey Rebellion was a violent tax protest in the United States beginning in 1791 and ending in 1794 during the presidency of George Washington. Washington needed to mobilize local militias into PA resulting in several deaths and 150 captured or arrested to squash the rebellion.

Something like doubling the income tax specifically on the working class, self-employed individuals in a city that already has huge income disparities while large corporations get away with paying anywhere from 0% - 3.74% (compared to the 11.891% the working class had to pay this year) can result in rebellion. Small business owners, freelancers and especially people working on a 1099-NEC should NOT have to pay more than the wage rate (3.74%) to fund 10 year property tax abatements for large venture capital firms.

Philadelphia Inquirer Philadelphia Department of Commerce City of Philadelphia Government Small Business Saturday Philadelphia

Here is a breakdown of the BIRT vs NPT and how the actual tax liability for an individual making $35000 on a 1099-NEC has been impacted by this draconian system. While the city did give a 2 year phase in period for the MANDATORY prepay, I chose to leave it in this calculation to show what the implied impact will be once it's fully phased in.

04/20/2026

After seeing how adverse this BIRT law change has been for small business owners in just one tax season, I put together a mathematical breakdown of the tax on the low and middle income earners in the city. For income earners making under $100,000 a year (the majority of the people that are now subjected to this tax), the law is more than doubling the tax they would otherwise have to pay.

NPT has 2 quarterly estimates adding up to 50% of the current year balance (non-required) , where BIRT in 2 years will have a full year, 100% required prepayment of the tax (there's a phase-in period allowing for 4 quarterly estimates next year).

Without non required estimates, the tax goes from 3.74% to a whopping 11.734% (with an additional 0.282% tax on gross receipts). Considering the non required estimates it would be a change of 5.61% to 11.891% (also with the 0.282% tax on gross receipts).

Again this tax is mostly on working class individuals on 1099-NECs, single member LLCs, and sole properties. While most S and C Corps will pay their owners salaries to reduce income to near 0% and only pay Philly Wage of 3.74% and most large SaaS Corporations with business in the city will likely not file a BIRT or NPT claiming tax nexus in a tax advantaged state or also file $0 income returns.

This tax law change will either kill small business/freelance/contractor work, lead to massive tax fraud, and/or cause a mass exodus of Philadelphians over the next decade.

Even if you are a salaried employee or non Philly resident, this can have long term implications for the Greater Philadelphia Area and should be stopped. Please share this and reach out to your local reps to get small business owners and independent contractors off the Business Income and Receipts Tax.

Philadelphia Department of Commerce Philadelphia Inquirer Josh Shapiro U.S. Small Business Administration

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03/26/2026

If you file with TurboTax or other SaaS tax platforms that rely on user knowledge to complete a return, don't forget about FBAR rules and regulations.

FinCEN requires anyone that has signature authority over foreign bank and investments in excess of $10,000 USD (aggregate) on any day during the calendar year to file an FBAR (Foreign Bank and financial Account Reporting). Fines and penalties can add up to over $16,500, so don't cut corners if you think you're close to the threshold.

02/27/2026

Some of the tax law changes from the that apply to individuals

02/10/2026

Tax season reminder:

If you lived in Philadelphia and received a 1099-NEC or run a small business, you will have to pay the Philly BIRT tax regardless of income this year.

While most citizens were hoping for a generous increase of the exemption amount (previously $100,000) to keep pace with the raise the mayor gave her team and the staggering increase in cost of living in the city since the initial exemption amount was put in place back in 2015, the Mayor's office switched gears entirely and revoked the exemption that most small business owners and independent contractors relied on to stay in business.

Hopefully, this gets rectified by the time next season comes around, but in the interim be prepared for higher taxes for your Schedule C (Self-Employment) and Schedule E (Rental) income if you are conducting business within city limits.

Many businesses are likely unprepared and unaware they need to start paying the city's Business Income and Receipts Tax.

05/21/2025

I'm not sure how this got through, but looks like a 300% increase in the SALT cap is a sure thing now with a phase out starting at $500,000 AGI.

2025 is gearing up to be an interesting year for taxpayers and the IRS.

Republican leaders approach a long-sought agreement with lawmakers from high-tax states.

04/22/2025

To everyone that did your civic duty and paid the Federal government thousands of dollars, congratulations! Here is a history of the tax system of America, and how the use of excise taxes and tariffs funded the country long before the federal income tax came along.

Also if it takes you more than 5 hours to file on TurboTax, it may be worth looking into filing with a tax professional next year. While you may save $50 by filing yourself, you're wasting your valuable time. And due to the lack of safeguards, self filing may result in incorrect or incomplete returns that result in more penalties and audits from the IRS or state DoRs.

https://open.spotify.com/episode/1tcuDIEecA9nuowKC5j2GI?si=sXmMMnqVQfKqt3LI0BlmLg&context=spotify%3Ashow%3A2VRS1IJCTn2Nlkg33ZVfkM

99% Invisible · Episode