Taxation Department

Business Tax

   

Department of Taxation -- Business Tax Filing

 
1. Does a business have to file a return?
All businesses located in or working in Trenton must file a return annually regardless of the organization's form (C-Corporation, S-Corporation, Partnership, or Sole Proprietor) and regardless of whether the business had income or a loss for the year. Generally, a business will use Form BR (business return) to report its income and expenses. However, if you are employed as an individual but earn incidental income from a side business, you may simply include this in your individual return, Form IR, rather than fill out a separate business return (refer to Section A, question 6).
 
2. How should S-Corporations and Partnerships report their profits?
Unlike federal tax requirements for Trenton income tax purposes profits of S-Corporations and Partnerships are not passed through to shareholders or individual partners for inclusion in their individual returns (in most cases). An exception to this rule is a resident partner involved in a non-resident partnership, which isn't taxed (report on Form IR). S-Corporations and Partnerships must report and pay the Trenton income tax as a business using Form BR.
 
3. What income should an Incorporated business report?
An Incorporated business should report all income earned for work performed in the City. If you performed work both inside and outside the City limits, an allocation may need to be made on page 2, Schedule Y of Form BR to determine the taxable portion to the City of Trenton.
 
4. What income should an Unincorporated (sole proprietor) business report?
The income that should be reported depends on whether both the owner and the business are resident or non-resident. An owner is a resident when his or her primary residence is within the city limits. A resident business is a business entity having an office, operation, or business site within the City.

A. If the owner is a resident and the business is a resident then all income is subject to tax, regardless of where the work was performed.

B. If the owner is a resident and the business is a non-resident, all income is subject to tax, regardless of where the work was performed. However, if taxes are paid to a city (other than Trenton) in which the business resides, then Trenton will grant the business a credit up to the amount paid to the other municipality (but not in excess of the 1.5% Trenton tax).

C.  If the owner is a non-resident and the business is a resident, then credit up to 1.5% will be allowed for city taxes paid to other municipalities.

D. If the owner and the business are both non-resident, then only income earned on work performed in the City is taxable.

 
5. How is Taxable income determined for businesses?
The determination of "Taxable income" for the local tax generally follows IRS rules. The exceptions are on Schedule X. Some of them are:

- Capital gains (except those taxed as ordinary income by the IRS), interest, and dividends are non-taxable.

- Capital losses are non-deductible.

 
6. How are net operating losses treated?
A Corporation or Partnership may carry forward the loss and can offset it against its future taxable income for up to three years.

For Unincorporated businesses, if you operated more that one Trenton business, a net operating loss can be used to offset profits from any other type of Trenton business you operate. The remainder of the loss that could not be offset to other business profits can be carried forward to be used as a future offset for up to three years. Net operating losses cannot be used to offset wages.

 
7. Can I combine reporting for more than one unincorporated Trenton business on a single tax return?
Yes, you may combine the results on one Form BR. Where the businesses are relatively small, (see Section A, question 6), you may use Form IR. In both cases attach copies of all applicable federal reporting forms (Schedule C, E, etc.).