Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

v3.22.1
INCOME TAXES
12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]

NOTE 11 INCOME TAXES

 

The recognized deferred tax asset is based upon the expected utilization of its benefit from future taxable income. The Company has federal net operating loss (“NOL”) carryforwards of approximately $5,400,000 as of December 31, 2021, which is subject to limitations under Section 382 of the Internal Revenue Code. These carryforward losses are available to offset future taxable income and begin to expire in the year 2025 to 2033.

 

The foregoing amounts are management’s estimates, and the actual results could differ from those estimates. Future profitability in this competitive industry depends on continually obtaining and fulfilling new profitable sales agreements and modifying products. The inability to obtain new profitable contracts could reduce estimates of future profitability, which could affect the Company’s ability to realize the deferred tax assets. Significant components of the Company’s deferred tax assets and liabilities are summarized as follows:

 

   

December 31,

   

December 31,

 
   

2021

   

2020

 

Deferred tax assets:

               

Net operating loss carry forwards

  $ 1,314,000     $ 1,431,000  

Long lived assets

    101,000       117,000  

Share based payments

    5,000       6,000  

Accrued expenses

    77,000       -  

Allowance for doubtful accounts

    95,000       107,000  

Other

    16,000       13,084  

Deferred tax asset

    1,608,000       1,674,084  
                 

Deferred tax liabilities:

               

Long lived assets

    (197,000

)

    (173,000

)

Deferred tax liabilities

    (197,000

)

    (173,000

)

Net deferred tax asset

    1,411,000       1,501,084  

Less: Valuation allowance

    (420,000

)

    (462,000

)

Net deferred tax asset

  $ 991,000       1,039,084  

 

For the year ended December 31, 2021, the Company’s Federal and State provision requirements were calculated based on the estimated tax rate. The Federal effective rate is higher than the statutory rate primarily due to Incentive Stock Options (ISO), gain on bargain purchase, 50% of meals, and 100% entertainment expense which are not tax deductible. The total tax provision for the year ended December 31, 2021 was $178,005.

 

For the year ended December 31, 2020, the Company’s Federal and State provision requirements were calculated based on the estimated tax rate. The Federal effective rate is higher than the statutory rate primarily due to 50% of meals, 100% entertainment expense which are not tax deductible. The total tax provision for the year ended December 31, 2020 was $47,391.

 

A reconciliation of the statutory income tax rate to the effective rate is as follows for the period December 31, 2021 and 2020:

 

   

December 31,

   

December 31,

 
   

2021

   

2020

 

Federal income tax rate

    21

%

    21

%

State income tax, net of federal benefit

    61

%

    7

%

Permanent items

    218

%

    3

%

Gain on bargain purchase

    (34

%)

    -

%

Return to provision for prior year

    135

%

    (7

%)

Change in valuation allowance

    6

%

    -

%

Other

    -

%

    (3

%)

Effective income tax rate

    407

%

    21

%

 

Income tax provision from continuing operations:

 

   

Year Ended

 
   

December 31,

   

December 31,

 
   

2021

   

2020

 

Current:

               

Federal

  $ 92,334     $ 136,083  

State and local

    37,545       75,910  
                 

Total current tax provision

    129,879       211,993  
                 

Deferred:

               

Federal

    51,207       (115,221

)

State and local

    (3,081

)

    (49,381

)

                 

Total deferred tax provision (benefit)

    48,126       (164,602

)

                 

Total provision

  $ 178,005       47,391