In what can only be considered an understatement of epic proportions, local businessman Chris Cera — an expert in many things, including Philadelphia’s convoluted business tax system — once described that system thusly: “The complexity of taxes in Philly is really… a problem.”
I was reminded of this remarkably calm assessment over the last several months, as I — a consultant who is a “sole proprietor” in tax terms — have received multiple notices from the City’s Revenue Department, and in some cases from an outside collections agency, claiming I owe Net Profit (NPT) and Business Income and Receipt (BIRT) taxes dating back to 2017.
Unlike Cera, my reaction to these notices was … not understated. (Actually, there was epic swearing.) Because, in fact, I have paid all those taxes.
Luckily(?) for me, I have an accountant. I speak English. I keep copies of my tax filings, and had proof of payment. I have the time and wherewithal to write to the Revenue Department, and to call the collections agency — twice — and to keep at it until I get answers. Without all that, this debt might follow me for years.
As another tax season wraps up, I can’t help but wonder if and when this whole saga might end — and if I’m going to keep getting unpaid tax notices for years to come.
Here’s what happened:
- Fall of 2023, I start getting notices from the City Revenue Department that I owed NPT and BIRT payments for 2020, 2021 and 2022 to the tune of about $8,452. Notably (this is relevant for later), the notices do not include my tax account number.
- I ring my accountant, Tom, who assures me everything is paid up.
- Tom calls the City on my behalf. He is number 82 in line, waits on hold for three hours before hanging up.
- The next day, he gets to his office early, calls the Revenue Department as soon as they open at 8:30 am. This time, he is number 57 in line, and is on hold for another three hours before hanging up.
- He repeats this a few more times.
- The first collections notice comes in early 2024. I call and tell the collections agency about my dispute with the City, and they put it on hold.
- In January, Tom goes to the revenue office in person, where he waits about 45 minutes before being called up to a customer service window. By now he has with him records for eight different clients, all of whom have received notices about failures to pay back business taxes. “They’re sending notices out like candy,” Tom says. “Meanwhile, they’re not friendly, not answering questions, not helping you resolve the issue.”
- When he gets to my claim, the Revenue representative is unable to explain to Tom what’s going on. She tells him to come back with proof of payment, like a bank statement showing that my check had been cashed.
- While I sift through years’ old bank statements, I get another notice from the City. This one, for “unpaid” NPT taxes from 2017-2019, including interest and penalties is a bill for — wait for it — $32,000. (They offer to cut a $9,000 penalty if I pay up within 30 days.)
- I call Tom and veritably scream into the phone: “The City of Philadelphia is demanding I pay $30,000-$40,000 in back taxes.”
- Tom, again, assures me all these NPTs have been paid.
- Sigh.
Interlude: What in taxpayer hell is going on?
According to Rebecca Lopez-Kriss, deputy commissioner for Policy, Outreach, and Taxpayer Assistance Programs (and a Philadelphia Citizen 2022 Integrity Icon), this situation stems from 2020, when the Department of Revenue embarked on the much-needed process of updating its 35-year-old tax software system.
That new system has some benefits — including an easier platform on which to get all your tax needs in one place, and being the same system as the state’s — but it has had a couple massive flaws:
- It failed to appropriately apply estimated Net Profit Tax payments from one year to the next. This triggered some of the notices I got. (This has since been fixed.)
- It uncovered 10,000 “unapplied payments” from companies that sent inaccurate information, including incorrect tax IDs. Those taxpayers got notices, too, and many of them are calling the department to clear things up, leading to an even bigger logjam than usual.
It seems that my taxes fall into both categories: The Revenue Department failed to apply some NPT payments from some years to the next. And — for whatever reason that is probably my fault — I have two different tax account numbers. While it’s true that I paid my business taxes under one account number and have a zero balance, the other account appeared to fall into arrears.
Here’s what happened next:
- After a Revenue staffer in Lopez-Kriss’s department sends me a note explaining the discrepancy with my two account numbers, I go back and look at the notices I received. None of them include my account numbers. There is a “Letter ID” number and a “Case ID” number. But there is no way for me to have known that these records were associated with a tax account I have not been using.
- I forward all this information to Tom, who dutifully calls the Revenue Department helpline again. This time, he waits for two hours and then hangs up.
- The City sends a second notice about the $32,000 payments owed.
- By now, it’s peak tax season, and Tom is busy filing 2023 tax returns for his clients. He calls to tell me he won’t be able to address this until after April 15.
- In the meantime, I send a sternly-worded, pleading email to revenue.discovery@phila.gov, along with all my documentation — images of the notices, and screenshots of the assistant’s email, receipts from tax filings, and checks made out to the City of Philadelphia, along with a version of this narrative — and to tell them I am trying to resolve this issue.
- Two days later, a Tax Assessor in the Revenue Department’s Tax Discovery Unit writes back asking for my business name and/or tax account number (which is in the documentation I shared, but it was a lot to go through).
- Two days after I send her the info, she replies: “Yes, it’s all filed and paid fully. There is no tax liability. I will work on this and send you No Tax Liability (NTL) letter probably next week once it’s approved.”
- Wait — what?
- This seems to be … success!
Time Spent: At least 20 hours over the course of four months.
Cost: $0 in overdue tax payments. Bill from Tom? TBD. Meanwhile, who’s paying me for all the lost time I’ve spent trying to resolve this issue?
Result: My new friend in the Tax Discovery Unit was a lifesaver. She acted promptly and professionally to resolve the issue. That was no doubt helped by the hours I spent gathering information so that by the time I reached out to her, I had a bevy of materials that explained the situation and proved I had paid my taxes. Getting to that point was a massive headache, and a poor example of how the City of Philadelphia treats small business owners.
Takeaways: It’s been said many times, but it bears repeating: Philadelphia is at once the poorest big city in America, and one of its most heavily taxed. Our legislators push back against tax reform because they insist we need the money to operate our ever-growing city budget, whose most important functions should be to keep Philadelphians safe and thriving. This fiasco signals not just a lack of care for customers, but also perhaps (?) City Hall is not to be trusted with our money. (Remember Mayor Kenney’s missing $30 million?)
It also begs the question that many entrepreneurs before me have asked: Why on earth do I run a business in Philadelphia? This taxes (pun intended) the patience and ambitions of even a die-hard Philly booster like myself.
Tom, who has been an accountant in and around Philadelphia for 30 years, is appalled. “It’s never been like this before,” he tells me. “Like, never.”
Lightning Bolt Rating: 
