All businesses located in or working in
Middletown 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).
Unlike federal tax requirements for Middletown
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 and Partnerships must
report and pay the Middletown income tax as a business using Form
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 Middletown.
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
The determination of "Taxable income" for the local tax generally
follows IRS rules. The exceptions are on Schedule X. Some of them
A Corporation or Partnership may carry forward
the loss and can offset it against its future taxable income for
up to five years.
For Unincorporated businesses, if you operated more that
one Middletown business, a net operating loss can be used
to offset profits from any other type of Middletown
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 five years. Net
operating losses cannot be used to offset wages.
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.).