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Income Taxes | 12 Months Ended
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Dec. 31, 2021
Income Taxes |
Income Taxes |
7. | Income Taxes. Income tax benefit consists of the following:
Year Ended December 31 |  | 2021 |  |  | 2020 |
Current taxes - Federal |  | $ | — |  |  | $ | (233,000 | )
Current taxes - State |  |  | 42,000 |  |  |  | 42,000 |
Income tax expense (benefit) |  | $ | 42,000 |  |  | $ | (191,000 | )
| The actual tax benefit attributable to loss before taxes differs from the expected tax benefit computed by applying the U.S. federal corporate income tax rate of 21% as follows:
Year Ended December 31 |  | 2021 |  |  | 2020 |
Federal statutory rate |  |  | 21.0 | % |  |  | 21.0 | %
Stock-based awards |  |  | 2.0 |  |  |  | (0.8 | )
State taxes |  |  | 3.6 |  |  |  | 3.6 |
Impact of uncertain tax positions |  |  | (1.0 | ) |  |  | (0.7 | )
Valuation allowance |  |  | (34.3 | ) |  |  | (19.6 | )
PPP forgiveness |  |  | 7.5 |  |  |  | — |
Other |  |  | — |  |  |  | 0.8 |
Effective federal income tax rate |  |  | (1.2 | )% |  |  | 4.3 | %
| Components of resulting noncurrent deferred tax assets (liabilities) are as follows:
As of December 31 |  | 2021 |  |  | 2020 |
Deferred tax assets |  |  |  |  |  |
Accrued expenses |  | $ | 507,000 |  |  | $ | 376,000 |
Inventory reserve |  |  | 23,000 |  |  |  | 9,000 |
Stock-based awards |  |  | 31,000 |  |  |  | 65,000 |
Reserve for bad debts |  |  | 88,000 |  |  |  | 33,000 |
Net operating loss and credit carryforwards |  |  | 2,507,000 |  |  |  | 1,422,000 |
Other |  |  | 33,000 |  |  |  | 47,000 |
Depreciation |  |  | 33,000 |  |  |  | 52,000 |
Valuation allowance |  |  | (3,146,000 | ) |  |  | (1,946,000 | )
Total deferred tax assets |  | $ | 76,000 |  |  | $ | 58,000 |
Deferred tax liabilities |  |  |  |  |  |  |  |
Prepaid expenses |  | $ | (76,000 | ) |  | $ | (58,000 | )
Total deferred tax liabilities |  |  | (76,000 | ) |  |  | (58,000 | )
Net deferred income tax liabilities |  | $ | — |  |  | $ | — |
| As of December 31, 2021, the Company had a Federal net operating loss (NOL) to carry forward of approximately $9,700,000 and state NOLs of approximately $7,400,000 to carry forward. The Federal NOLs can be carried forward indefinitely. The expiration of state NOLs carried forward varies by taxing jurisdiction. Future utilization of NOLs carried forward may be subject to certain limitations under Section 382 of the Internal Revenue Code. In March 2020, Congress passed the Coronavirus Aid, Relief and Economic Security (“CARES”) Act. The CARES Act, among other provisions, allows for companies to carry back federal NOLs generated in 2018, 2019 and 2020 for up to five years for refunds of federal taxes paid. This provision created an opportunity for the Company to utilize NOLs not previously expected to be utilized. Thus in 2020, the Company reversed approximately $215,000 of its valuation allowance against the NOLs in its deferred tax assets which the Company carried back to claim a refund of federal taxes paid. The Company received this refund in 2021. The Company evaluates all significant available positive and negative evidence, including the existence of losses in prior years and its forecast of future taxable income, in assessing the need for a valuation allowance. The underlying assumptions the Company uses in forecasting future taxable income require significant judgment and take into consideration the Company’s recent performance. The change in the valuation allowance for the years ended December 31, 2021 and 2020 was $1,200,000 and $943,000, respectively. The Company has recorded a liability of $711,000 and $677,000 for uncertain tax positions taken in tax returns in previous years as of December 31, 2021 and 2020, respectively. This liability is reflected as accrued income taxes on the Company’s balance sheets. The Company files income tax returns in the United States and numerous state and local tax jurisdictions. Tax years 2018 and forward are open for examination and assessment by the Internal Revenue Service. With limited exceptions, tax years prior to 2018 are no longer open in major state and local tax jurisdictions. The Company believes that it is reasonably possible that a decrease of up to $665,000 in unrecognized tax benefits related to state exposures may be necessary in the third quarter of 2022, which would reduce accrued income taxes and increase income tax benefit. A reconciliation of the beginning and ending amount of the liability for uncertain tax positions is as follows:
Balance at January 1, 2020 |  | $ | 643,000 |
Increases due to interest and state tax |  |  | 34,000 |
Balance at December 31, 2020 |  |  | 677,000 |
Increases due to interest and state tax |  |  | 34,000 |
Balance at December 31, 2021 |  | $ | 711,000 |

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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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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