NOTE 8 - 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 $113,726 and $225,231, respectively, and the total of the deferred liabilities was $542 and $4,440, 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 $113,726 and $225,231 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 $112,759 and $112,472, respectively.
On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was signed into law. The Act decreases the U.S. corporate federal income tax rate from a maximum of 35% to a flat 21% effective January 1, 2018. The impact of the re-measurement on the Corporation’s net deferred tax asset, as of December 31, 2017, was an approximately $55,124 decrease in deferred tax assets, with a corresponding decrease in the Company’s valuation allowance, and no impact on income tax expense. The Act also includes a number of other provisions including, among others, the elimination of net operating loss carrybacks and limitations on the use of future losses, the repeal of the Alternative Minimum Tax regime and the repeal of the domestic production activities deduction. These provisions are not expected to have a material effect on the Corporation.
Given the significant complexity of the Act and anticipated additional implementation guidance from the Internal Revenue Service, further implications of the Act may be identified in future periods.
The components of income tax expense (benefit) for the years ended December 31, 2017 and 2016 consist of the following:
|
|
|
|
2017 |
|
|
2016 |
|
|
Deferred tax benefit: |
|
|
|
|
|
|
|
|
Federal |
|
$ |
(5,005) |
|
$ |
101,622 |
|
|
State |
|
|
4039 |
|
|
10,850 |
|
|
Increase in valuation allowance |
|
|
966 |
|
|
(112,472) |
|
|
Deferred tax benefit |
|
$ |
- |
|
$ |
- |
|
A reconciliation of income tax expense at the federal statutory rate to income tax expense at the company’s effective rate for the years ended December 31:
|
|
|
|
2017 |
|
|
2016 |
|
|
|
|
|
|
|
|
|
Computed tax at the expected statutory rate |
|
$ |
(5,005) |
|
$ |
(101,640) |
|
State and local income taxes, net of federal |
|
|
4,039 |
|
|
(10,850) |
|
Revaluation of deferred tax assets for change in Federal Tax Rate |
|
|
(55,124) |
|
|
- |
|
Other non-deductible expenses |
|
|
- |
|
|
18 |
|
Change in Valuation allowance |
|
|
(54,158) |
|
|
112,472 |
|
Income tax expense/(benefit) |
|
$ |
- |
|
$ |
- |
The temporary differences, and carryforwards gave rise to the following deferred tax assets at December 31, 2017 and 2016:
|
|
|
|
2017 |
|
|
2016 |
|
Deferred tax assets: |
|
|
|
|
|
|
|
Allowance for obsolete inventory |
|
$ |
542 |
|
$ |
4,440 |
|
Common stock awarded for services |
|
|
3,802 |
|
|
25,400 |
|
Stock options granted for services |
|
|
5,231 |
|
|
8,376 |
|
Net operating loss carryforward |
|
|
104,151 |
|
|
187,015 |
|
Total deferred tax assets |
|
|
113,726 |
|
|
225,231 |
|
Valuation allowance |
|
|
(113,726) |
|
|
(225,231) |
|
Net deferred tax assets |
|
$ |
- |
|
$ |
- |