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Income Taxes | 9 Months Ended
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Sep. 30, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Note 12 – Income Taxes Provision (benefit) for Income Taxes and Effective Income Tax Rate Schedule of Income Taxes and Effective Income Tax Rate
|  | September 30, 2024 |  |  | September 30, 2023 |
Federal |  |  |  |  |  |  |  |
Current |  | $ | 135,000 |  |  | $ | - |
Deferred |  |  | 2,835,000 |  |  |  | - |
Total provision (benefit) |  | $ | 2,970,000 |  |  | $ | - |
State |  |  |  |  |  |  |  |
Current |  | $ | - |  |  | $ | - |
Deferred |  |  | - |  |  |  | - |
Total provision (benefit) |  | $ | - |  |  | $ | - |
SURGEPAYS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 A reconciliation of the provision for income taxes to the amount computed by applying the statutory federal income tax rate of 21% to income before provision for income taxes for the nine months ended September 30, 2024 and 2023, respectively, is approximately as follows: Schedule of Components of Income Tax Expense (Benefit)
|  | September 30, 2024 |  |  | September 30, 2023 |
Federal income tax expense (benefit) - 19.64% |  | $ | (5,096,000 | ) |  | $ | 893,000 |
State income tax expense (benefit) - 6.5% - net of federal effect |  |  | (1,552,000 | ) |  |  | 296,000 |
Non-deductible items |  |  | 1,388,000 |  |  |  | - |
Subtotal |  |  | (5,260,000 | ) |  |  | 1,189,000 |
Change in valuation allowance |  |  | 8,230,000 |  |  |  | (1,189,000 | )
Income tax expense (benefit) |  | $ | 2,970,000 |  |  | $ | - |
Effective tax rate |  |  | -12.92 | % |  |  | 0.00 | %
Deferred Tax Assets and Liabilities As of September 30, 2024 and December 31, 2023, respectively, the significant components of deferred tax assets and liabilities is as follows: Schedule of Deferred Tax Assets and Liabilities
|  | September 30, 2024 |  |  | December 31, 2023 |
Deferred Tax Assets |  |  |  |  |  |  |  |
Reserve for uncollectible accounts |  | $ | 3,000 |  |  | $ | 5,000 |
Stock based compensation |  |  | 178,000 |  |  |  | - |
Net operating loss carryforwards |  |  | 8,077,000 |  |  |  | 3,844,000 |
Total deferred tax assets |  |  | 8,258,000 |  |  |  | 3,849,000 |
Less: valuation allowance |  |  | (8,037,000 | ) |  |  | (790,000 | )
Net deferred tax assets |  |  | 221,000 |  |  |  | 3,059,000 |
Deferred Tax Liabilities |  |  |  |  |  |  |  |
Depreciation |  |  | 52,000 |  |  |  | 224,000 |
Amortization |  |  | 165,000 |  |  |  | - |
Net deferred tax liabilities |  |  | 217,000 |  |  |  | 224,000 |
Deferred income taxes - net |  | $ | - |  |  | $ | 2,835,000 |
SURGEPAYS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 Deferred tax assets and liabilities are computed by applying the federal and state income tax rates in effect to the gross amounts of temporary differences and other tax attributes, such as net operating loss carry forwards. In assessing if the deferred tax assets will be realized, the Company considers whether it is more likely than not that some or all of these deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which these deductible temporary differences reverse. As a result of historic losses, the Company has recorded a full valuation allowance as of September 30, 2024. As of September 30, 2024, the Company had federal and state net operating loss carryforwards of approximately $32,000,000 and $28,000,000, respectively. The federal net operating losses carry forward indefinitely, and accordingly have not been reserved. The state net operating losses will expire between the years ending December 31, 2036 and 2038. The state net operating losses have been fully reserved as management does not believe that it is probable that the losses will be utilized before their expiration. During the nine months ended September 30, 2024, the valuation allowance increased by approximately $7,247,000. The total valuation allowance results from the Company’s estimate of its future recoverability of its net deferred tax assets. The Company is in the process of analyzing their NOL and has not determined if the Company has had any change of control issues that could limit the future use of these NOL’s. As of December 31, 2023, all federal NOL carryforwards that were generated after 2017 may only be used to offset 80% of taxable income and are carried forward indefinitely. The Company follows the provisions of ASC 740, which requires the computations of current and deferred income tax assets and liabilities only consider tax positions that are more likely than not (defined as greater than 50% chance) to be sustained if the taxing authorities examined the positions. There are no significant differences between the tax provisions represented in the accompanying consolidated financial statements and that reported in the Company’s income tax returns. The Company is subject to U.S. Federal and State income tax examination by taxing authorities for the years after December 31, 2020. The Company files corporate income tax returns in the United States and State of Tennessee jurisdictions. Due to the Company’s net operating loss posture, all tax years are open and subject to income tax examination by tax authorities. The Company’s policy is to recognize interest expense and penalties related to income tax matters as tax expense. At September 30, 2024 and December 31, 2023, respectively, there are no unrecognized tax benefits, and there were no significant accruals for interest related to unrecognized tax benefits or tax penalties.

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