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Income Taxes
 12 Months Ended
Dec. 31, 2014
Income Taxes [Abstract]  
Income Taxes
11.

Income Taxes

  

The Company’s benefit for income taxes consists of the following for the year ended December 31, 2014 and 2013:

 

 

      2014     2013  
  Deferred:            
  Federal   $ (426,761 )   $ (692,787 )
  State and local     (71,638 )     (389,582 )
  Total deferred     (498,399 )     (1,082,369 )
                   
  Total benefit for income taxes     (498,399 )     (1,082,369 )
  Less: valuation reserve     498,399       1,082,369  
  Income Tax provision   $ -     $ -  

 

A reconciliation of the federal statutory rate to 0% for the year ended December 31, 2014 and 2013 to the effective rate for income from operations before income taxes is as follows:


 

      2014     2013  
               
  Benefit for income taxes at federal statutory rate     34.0 %     34.0 %
  State and local income taxes, net of federal benefit     8.2       9.6  
  Differences attributable to change in state business apportionment     (6.2 )     (1.9 )
  Change in fair value of derivative liabilities     19.3       7.3  
  Loss on extinguishment of debt     (28.2 )     -  
  True-up     5.8       1.8  
  Other     (0.5 )     (0.5 )
  Less valuation allowance     (32.4 )     (50.3 )
  Effective income tax rate     0.0 %     0.0 %


 

During 2014, the Company adjusted its estimate of business apportionment, thus decreasing its tax effective state and local tax rate from 9.6% to 8.2%. The decrease is primarily due to allocation of business receipts from New York State and New York City.

 


 

The tax effects of these temporary differences along with the net operating losses, net of an allowance for credits, have been recognized as deferred tax assets (liabilities) at December 31, 2014 and 2013 as follows:

 

      2014     2013  
  Net operating loss carryforward   $ 2,910,932     $ 2,294,888  
  Bad debt reserve     128,313       121,792  
  Employee stock compensation     618,512       510,816  
  Net conversion feature discount     (225,938 )     -  
  Accrued losses on uncompleted jobs     -       4,318  
  Depreciation     1,083       419  
  Related party expenses     -       2,618  
  Charity     348       -  
  Net deferred tax asset     3,433,250       2,934,851  
  Less valuation allowance     (3,433,250 )     (2,934,851 )
                   
  Net deferred tax asset   $ -     $ -  


 

The Company establishes a valuation allowance, if based on the weight of available evidence; it is more likely than not that some portion or all of the deferred assets will not be realized. The valuation allowance increased $498,399 and $1,082,369 during 2014 and 2013, respectively, offsetting the increase in the deferred tax asset attributable to the net operating loss and reserves.

  

As of December 31, 2013, the Company has a net operating loss carry forward of approximately $6,893,000 for Federal tax purposes.  The net operating loss expires through 2034.

 

As required by the provisions of ASC 740, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely that not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. Differences between tax positions taken or expected to be taken in a tax return and the net benefit recognized and measured pursuant to the interpretation are referred to as “unrecognized benefits.” A liability is recognized (or amount of net operating loss or amount of tax refundable is reduced) for an unrecognized tax benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740.

 

The Company recognizes interest and penalties related to uncertain tax positions in general and administrative expenses. As of December 31, 2014, the Company has no unrecognized tax positions, including interest and penalties. The tax years 2011 - 2013 are still open to examination by the major tax jurisdictions in which the Company operates. The Company files returns in the United States Federal tax jurisdiction and various other state jurisdictions.