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Department of Taxation -- Business Tax Filing
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1. Does a business
have to file a return? |
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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). |
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2. How should
S-Corporations and Partnerships report their profits? |
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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. |
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3. What income
should an Incorporated business report? |
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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. |
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4. What income
should an Unincorporated (sole proprietor) business report? |
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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. |
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5. How is Taxable
income determined for businesses? |
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The determination of
"Taxable income" for the local tax generally follows IRS rules.
The exceptions are on Schedule X. Some of them are:
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Capital gains
(except those taxed as ordinary income by the IRS), interest,
and dividends are non-taxable.
- Capital losses
are non-deductible. |
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6. How are net
operating losses treated? |
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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. |
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7. Can I combine
reporting for more than one unincorporated Trenton business on a
single tax return? |
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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.). |
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