All residents of Middletown are required to file a tax return regardless of where they work. Residents, age 65 or over may be eligible for a senior account. Contact our office for details.

You are subject to tax on all income earned while working in the City, regardless of where you live or where your employer's main office is located. But, the City holds the employer liable for withholding the tax. Therefore, you do not have to file a Middletown tax return if you work in Middletown but live elsewhere. Exceptions to this:

• If you are a Federal employee working in the City of Middletown and your city tax is not withheld you must file a Middletown tax return.
• If you are self-employed in the City of Middletown and live elsewhere, you must file a Middletown tax return.

Earned income is subject to the Middletown local income tax but unearned income is not. Common illustrations of earned income include salaries, qualifying wages, commissions, bonuses, and other compensation paid by employer(s) before any deductions. Unlike for your Federal return, you may not deduct contributions to a retirement plan (IRA, 401k, 403b, or 457b) on your Middletown return. Also taxable are gambling and lottery winnings reported on IRS form W2G or Form 5754. Earnings are taxed in the year earned. Pension and retirement income is not taxable when you are retired and receiving distributions.

The City does not tax unearned income. Examples of unearned income are dividends, interest, capital gains (unless taxed as ordinary income), alimony received, military pay, state unemployment benefits, worker's compensation, social security, welfare assistance, and pension or retirement income.

The only expenses that can be deducted from earned income as an individual are those reported on the Federal Form 2106. These pertain to unreimbursed business expense incurred as an employee.

You may be employed and also earn incidental income on the side. If so, your incidental net income is subject to tax. It might be in the form of fees for consulting or professional services, honorariums from speaking engagements, royalties from publications, small construction jobs, rental property, or other earned income.

You may combine the results of each business and report the total on page one of the Form IR, Please also attach copies of all applicable federal forms.

Net operating losses cannot be used to offset employee wages. For unincorporated businesses, if you operated more than one business, a net operating loss can be used to offset profits from any other type of 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. Losses must be reported on Form IR, but are not deducted in the computation of your individual taxable income.

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 BR.

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 City.

• 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.
• 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 Middletown) in which the business resides, then Middletown will grant the business a credit up to the amount paid to the other municipality (but not in excess of the 1.75% Middletown tax).
• If the owner is a non-resident and the business is a resident, then only income earned for work performed in the City is taxable.
• If the owner and the business are both non-resident, then only income earned on work performed in the City is taxable.

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.

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.).

A resident employer or an employer having employees working within the City must withhold Middletown income tax (1.75%) from all salaries, qualifying wages, commissions, bonuses, or other compensation paid to employees. This is applicable for a business whose primary office is outside of the city limits, as well as those in the City.

Where a business fails to withhold the income tax from the employee, the City will hold the business responsible for paying the tax.

For calendar year taxpayers the due date is April 15. For other fiscal year end taxpayers the return should be filed within four months after the end of the fiscal year.

Every individual who anticipated any Middletown taxable income that is not subject to withholding of the Middletown tax must file a Declaration of Estimated Income Tax. All businesses that anticipate any Middletown taxable income must file the Declaration form, regardless of the amount of income anticipated. The declaration is due April 30 for calendar-year filers, or four months after the end of the fiscal year. The declaration of estimated tax must be submitted with payment of at least one-fourth of the estimated annual tax. An equivalent amount should be paid on the last day of the seventh, tenth, and thirteenth months. The City will bill you automatically for the second, third, and fourth payments.

You may be subject to interest and/or penalites for failing to either submit a return or to withhold and remit employee local income tax.

Tax return forms are available at the Middletown City Building or can be downloaded from this website. Make checks payable to the City of Middletown. The forms should be returned to:

City of Middletown
Division of Taxation
P.O. Box 428739
Middletown, Ohio 45042

You may call the Middletown Income Tax Division at (513) 425-7862 (or consult your tax advisor). When in doubt, call and ask! This service is free to Middletown taxpayers.