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INCOME TAXES
 12 Months Ended
Dec. 31, 2022
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, 2022, 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,

  
   

2022

    

2021

  

Deferred tax assets:

                

Net operating loss carry forwards

   $ 1,238,000     $ 1,314,000  

Long lived assets

     206,000       101,000  

Share based payments

     5,000       5,000  

Accrued expenses

     102,000       77,000  

Allowance for doubtful accounts

     122,000       95,000  

Other

     35,000       16,000  

Deferred tax asset

     1,708,000       1,608,000  
                 

Deferred tax liabilities:

                

Long lived assets

     (185,000

)

     (197,000

)

Deferred tax liabilities

     (185,000

)

     (197,000

)
                 

Net deferred tax asset

     1,523,000       1,411,000  

Less: Valuation allowance

     (417,000

)

     (420,000

)

Net deferred tax asset

   $ 1,106,000     $ 991,000  

 

For the year ended December 31, 2022, the Company recorded a tax benefit in the amount of $192,184 based on the estimated tax rate. The Federal effective rate is higher than the statutory rate primarily due to Incentive Stock Options (ISO), which are not tax deductible.

 

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.

 

A reconciliation of the statutory income tax rate to the effective rate is as follows for the period December 31, 2022 and 2021:

 

   

December 31,

    

December 31,

  
   

2022

    

2021

  

Federal income tax rate

     21

%

     21

%

State income tax, net of federal benefit

     (3

%)

     61

%

Permanent items

     (8

%)

     218

%

Gain on bargain purchase

     -       (34

%)

Return to provision for prior year

     30

%

     135

%

Change in valuation allowance

     1

%

     6

%

Effective income tax rate

     41

%

     407

%

 

Income tax provision from continuing operations:

 

   

Year Ended

  
   

December 31,

    

December 31,

  
   

2022

    

2021

  

Current:

                

Federal

   $ (105,826

)

   $ 92,334  

State and local

     22,410       37,545  
                 

Total current tax (benefit) provision

     (83,416

)

     129,879  
                 

Deferred:

                

Federal

     (78,677

)

     51,207  

State and local

     (30,091

)

     (3,081

)
                 

Total deferred tax (benefit) provision

     (108,768

)

     48,126  
                 

Total (benefit) provision

   $ (192,184

)

     178,005