NOTE 9 - INCOME TAXES
The Company accounts for income taxes in accordance with FASB ASC Topic 740, Accounting for Income Taxes which requires the Company to provide a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences between book and tax accounting and any available operating loss or tax credit carryforwards. At December 31, 2017 and 2016, the total of all deferred tax assets was $939,351 and $1,296,820, respectively, and the total of the deferred liabilities was $0 and $0, respectively. The amount of and ultimate realization of the benefits from the deferred tax assets for income tax purposes is dependent, in part, upon the tax laws in effect, the Company’s future earnings, and other future events, the effects of which cannot be determined. . Because of the uncertainty surrounding the realization of the deferred tax assets the Company has established a valuation allowance of $939,351 and $1,296,820 for the years ended December 31, 2017 and 2016. The change in the valuation allowance for the year ended December 31, 2017 and 2016 was $357,468 and $141,931, respectively.
The components of income tax expense (benefit) from continuing operations for the Years ended December 31, 2017 and 2016 consist of the following:
|
|
|
For the Years Ended | ||
|
|
|
December 31, | ||
|
|
|
2017 |
|
2016 |
|
Current tax expense: |
|
|
|
|
|
Federal |
$ |
- |
$ |
- |
|
State |
|
- |
|
- |
|
Current tax expense |
|
- |
|
- |
|
|
|
|
|
|
|
Deferred tax expense (benefit): |
|
|
|
|
|
Wage Accrual |
|
(38.999) |
|
- |
|
Goodwill |
|
46,383 |
|
46,383 |
|
Revaluation of deferred tax asset |
|
498,576 |
|
- |
|
Valuation Allowance |
|
(357,468) |
|
141,931 |
|
Net operating loss carryforward |
|
(148,492) |
|
(188,314) |
|
Subtotal deferred tax expense/(benefit) |
|
- |
|
- |
|
Income tax expense/(benefit) |
$ |
- |
$ |
- |
Deferred income tax expense/(benefit) results primarily from the reversal of temporary timing differences between tax and financial statement income. A reconciliation of income tax expense at the federal statutory rate to income tax expense at the company’s effective rate is as follows:
|
|
|
For the Years Ended | ||
|
|
|
December 31, | ||
|
|
|
2017 |
|
2016 |
|
|
|
|
|
|
|
Computed tax at the expected statutory rate |
$ |
(129,390) |
$ |
(96,449) |
|
State and local income taxes, net of federal |
|
47,494 |
|
(8,727) |
|
Other non-deductible expenses |
|
(3,042) |
|
(36,755) |
|
Change in federal corporate tax rate |
|
498,576 |
|
- |
|
Other items |
|
(56,170) |
|
- |
|
Valuation Allowance |
|
(357,468) |
|
141,931 |
|
Income tax expense/(benefit) |
$ |
- |
$ |
- |
The temporary differences, tax credits and carryforwards gave rise to the following deferred tax asset December 31, 2017 and 2016:
|
|
|
December 31, |
|
December 31, |
|
|
|
2017 |
|
2016 |
|
Deferred tax assets (liabilities): |
|
|
|
|
|
Allowance for doubtful accounts |
$ |
4,781 |
$ |
7,318 |
|
Accrued wages |
|
25,476 |
|
- |
|
Goodwill - impaired |
|
454,507 |
|
695,744 |
|
Goodwill – tax amortization |
|
(346,687) |
|
(484,313) |
|
Depreciation |
|
73 |
|
112 |
|
Net operating loss carryforward |
|
801,201 |
|
1,077,959 |
|
Valuation allowance |
|
(939,351) |
|
(1,296,820) |
|
Net term deferred tax assets (liabilities) |
$ |
- |
$ |
- |
At December 31, 2017, the company has loss carryforwards of approximately $3,375,920 that expire in various years through 2037.
We file U.S. federal, and U.S. states returns, and we are generally no longer subject to tax examinations for years prior to 2014 for U.S. federal and U.S. states tax returns.