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Income Taxes
 9 Months Ended 12 Months Ended
Sep. 30, 2022
Dec. 31, 2021
Income Tax Disclosure [Abstract]    
Income Taxes

Note 12. Income Taxes

 

At the end of each interim reporting period, the Company estimates its effective tax rate expected to be applied for the full year. This estimate is used to determine the income tax provision or benefit on a year-to-date basis and may change in subsequent interim periods. Accordingly, the Company’s effective tax rate for the three and nine months ended September 30, 2022 was 0%, compared to the effective tax rate of 0% for the three and nine months ended September 30, 2021. The Company’s effective tax rates for both periods were affected primarily by a full valuation allowance on domestic net deferred tax assets.

 

Note 10. Income Taxes

 

A reconciliation of the Federal statutory rate (28%) to the total effective rate applicable to income (loss) is as follows:

 

   Year Ended   Year Ended 
   December 31, 2021   December 31, 2020 
         
Expected benefit at statutory federal tax rate  $(979,527)  $(491,462)
State and local taxes, net of federal tax benefit   (311,373)   (155,505)
Other   (57,563)   264,094 
Change in valuation allowance   1,348,463    382,873 
Income tax expense (benefit)  $-   $- 

 

The components of the Company’s deferred tax assets are as follows:

 

   Year Ended
December 31, 2021		   Year Ended
December 31, 2020		 
Deferred tax assets:          
Fixed assets  $3,837   $10,169 
Interest   46,361      
Stock-based compensation   637,112    305,822 
Net operating losses - federal   1,687,053    963558 
Net operating losses – state and local   536,282    304,883 
Research Credit   28,985    6,735 
Gross deferred tax assets   2,939,630    1,591,167 
Less Valuation Allowance   (2,939,630)   (1,591,167)
Net deferred tax assets  $-   $- 

 

The authoritative guidance, requires the asset and liability method of accounting for deferred income taxes. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities. Deferred tax assets or liabilities at the end of each period are determined using the tax rate expected to be in effect when taxes are actually paid or recovered.

 

The guidance also requires that a valuation allowance be established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. A review of all available positive and negative evidence needs to be considered, including a company’s current and past performance, the market environment in which the company operates, length of carryback and carryforward periods and existing contracts that will result in future profits. After reviewing all the evidence, the company has recorded a full valuation allowance.

 

 

SHARPS TECHNOLOGY, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2021 AND 2020

 

Note 10. Income Taxes (continued)

 

At December 31, 2021 the Company had federal net operating loss carryforwards of $8,034,000 which do not expire and state and local net operating loss carryforwards of approximately $8,034,000, which expire through 2041.

 

The Company files a Federal and New York State tax returns on a year ending December 31, previously as of June 30. The years that remain subject to examination are the years ended June 30, 2018 and June 30, 2019, six months ended December 31, 2019 and the year ended December 31, 2020. Interest and penalties, if any, related to income tax liabilities are included in income tax expense. As of December 31, 2020, the Company does not have a liability for uncertain tax positions.

 

On March 27, 2020, the CARES Act was signed into law. The CARES Act includes provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, and modifications to the net interest deduction limitations. While the Company continues to evaluate the impact of the CARES Act, it does not currently believe it will have a material impact on the Company’s income taxes or related disclosures.