NOTE 3 - INCOME TAXES
The components of income tax expense (benefit) from continuing operations for the years ended December 31, 2017 and 2016 are as follows:
| Current | Deferred | Total | ||
| 2017 | ||||
| U.S. Federal | $ | 45,840 | - | 45,840 |
| States and Local | 128,000 | - | 128,000 | |
| Total | $ | 173,840 | - | 173,840 |
| 2016 | ||||
| U.S. Federal | $ | - | - | - |
| States and Local | 85,100 | - | 85,100 | |
| Total | $ | 85,100 | - | 85,100 |
Actual income tax expense for the years ended December 31, 2017 and 2016 is reconciled from the amount computed by applying the U.S. federal income tax rate of 34% to income before income taxes as follows:
| 2017 | 2016 | ||
| Expected tax expense |
$ |
574,250 | (314,500) |
| Reconciling items: | |||
| Permanent Differences/Discrete Items | 36,090 | (29,500) | |
| Change in Valuation Allowance | (390,750) | 429,100 | |
| Change in Tax Rate | (45,750) | - | |
| Total tax expense | $ | 173,840 | 85,100 |
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2017 and 2016 are presented below:
| 2017 | 2016 | |
| Deferred tax assets: | ||
| Net operating loss carryforward - Federal | 746,500 | 2,017,500 |
| Federal Minimum Tax | 73,750 | 28,000 |
| Reserve for accounts receivable | 247,000 | 340,000 |
| Intangibles | 39,000 | 10,000 |
| Accrued expenses | 220,000 | 167,000 |
| Total gross deferred tax assets | 1,326,250 | 2,562,500 |
| Valuation allowance | (1,321,250) | (2,530,000) |
| Net deferred tax assets | 5,000 | 32,500 |
| Deferred tax liabilities: | ||
| Plant and equipment | (5,000) | (32,500) |
| Net deferred tax liabilities | (5,000) | (32,500) |
| Net deferred tax assets | - | - |
There was a valuation allowance of $1,321,250 and $2,530,000 as of December 31, 2017 and 2016, respectively. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income, projections for future taxable income over the periods in which the deferred tax assets are deductible, and the scheduled reversal of deferred tax liabilities, management does not believe it is more likely than not the Company will realize the full benefits of these deductible differences at December 31, 2017.
Net operating loss carryforwards attributable to federal were $3,554,500 at December 31, 2017 expires at different dates through 2037.
There is not a provision for material uncertain tax positions for the Company at December 31, 2017 or 2016.
As of December 31, 2017, with few exceptions, the Company is no longer subject to U.S. Federal income tax examinations by tax authorities for years before 2014 and for state for years before 2013.