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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | NOTE 8 – INCOME TAXES As of December 31, 2019, the Company has approximately $4,515,000 of operating loss carryforwards for federal that may be applied against future taxable income. The net operating loss carryforwards will begin to expire in the year 2021 if not utilized prior to that date, expiring during various year through 2038. There is no provision for income taxes because the Company has historically incurred operating losses and maintains a full valuation allowance against its net deferred tax assets. The net operating loss carryforwards could be subject to limitation in any given year in the event of a change in ownership as defined by IRC Section 382. The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. The Act reduces the US federal corporate tax rate from 34% to 21%. The most significant impact of the legislation for the Company was a $242,000 reduction of the value of net deferred tax assets (which represent future tax benefits) as a result of lowering the U.S. corporate income tax rate from statutory rate of 34% to 21%. The valuation allowance overall increased by approximately $148,000 and $324,000 during the year ended 2019 and 2018 and was approximately $1,711,000 and $1,562,000 at December 31, 2019 and 2018, respectively. The Company has fully reserved the deferred tax asset resulting from available net operating loss carryforwards. The income tax provision charged to continuing operations for the years ended December 31, 2019 and 2018 was as follows:
|  | December 31, |
Current: |  | 2019 |  |  | 2018 |
U.S. federal |  | $ | (152,100 | ) |  | $ | (98,900 | )
State and local |  |  | (40,400 | ) |  |  | (29,600 | )
|  | $ | (192,500 | ) |  | $ | (128,500 | )
Deferred: |  |  |  |  |  |  |  |
U.S. federal |  |  | 70,000 |  |  |  | 3,000 |
State and local |  |  | - |  |  |  | 1,000 |
|  | $ | 70,000 |  |  | $ | 4,000 |
The income tax expense (benefit) differs from the expected amount of income tax expense (benefit) determined by applying a combined U.S. federal and state (Puerto Rico) income tax rate of 25% to pretax income (loss) for the years ended December 31, 2019 and 2018 as follows:
|  | December 31, |
|  | 2019 |  |  | 2018 |
Computed “expected” tax expense (benefit) |  | $ | (783,000 | ) |  | $ | (287,000 | )
Increase (decrease) in income taxes resulting from: |  |  |  |  |  |  |  |
Permanent differences |  |  | 7,000 |  |  |  | - |
Apportionment of Puerto Rico income |  |  | 380,000 |  |  |  | - |
Puerto Rico taxes |  |  | (70,000 | ) |  |  | (82,000 | )
Nondeductible expenses |  |  | 173,000 |  |  |  | 242,000 |
Change in valuation allowance |  |  | 148,000 |  |  |  | (324,000 | )
Other |  |  | 22,500 |  |  |  | 455,000 |
|  | $ | (122,500 | ) |  | $ | 4,000 |
Net deferred tax liabilities consist of the following components as of December 31, 2019 and 2018:
|  | December 31, |
Deferred tax Liability: |  | 2019 |  |  | 2018 |
Intangible asset amortization |  | $ | 28,000 |  |  | $ | 3,000 |
Intangible asset indefinite lived intangibles |  |  | 42,000 |  |  |  |  |
|  |  | 70,000 |  |  |  | 3,000 |
Deferred tax assets: |  |  |  |  |  |  |  |
Inventory allowances |  |  | 3,000 |  |  |  | 3,000 |
Returns reserve |  |  | 26,000 |  |  |  | 9,000 |
Stock-based compensation |  |  | 716,000 |  |  |  | 562,000 |
Temporary differences |  |  | 15,000 |  |  |  | - |
Net operating loss carryforwards - Puerto Rico |  |  | 3,000 |  |  |  | - |
Net operating loss carryforwards |  |  | 948,000 |  |  |  | 989,000 |
|  |  | 1,711,000 |  |  |  | 1,563,000 |
Less valuation allowance |  |  | (1,711,000 | ) |  |  | (1,563,000 | )
|  | $ | 70,000 |  |  | $ | 3,000 |

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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