Annual report pursuant to Section 13 and 15(d)

Note 10 - Income Taxes

v3.22.1
Note 10 - Income Taxes
 12 Months Ended
Dec. 31, 2021
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

Note 10.

Income Taxes

 

The provision for income taxes is at an effective rate different from the federal statutory rate due principally to the following:

 

   

2021

    

2020

  

Income (loss) before taxes

   $ (2,202,303 )   $ 413,379  

Income tax benefit (expense) at federal statutory rate

   $ 462,484     $ (86,800 )

State income tax benefit (expense), net of federal benefit

     97,318       (20,700 )

Permanent Differences

     (111,237 )     (7,400 )

Other

     19,485       1,000  

Net Operating Loss ("NOL") expirations

     -       (66,600 )

Change in federal valuation allowance

     602,804       180,500  
                 

Income tax benefit

   $ 1,070,854     $ -  

 

Income tax expense for the years ended December 31, 2021 and 2020 consists of the following:

 

   

2021

    

2020

  

Current income tax (expense) benefit

                

Federal

   $ -     $ -  

State & Local

     (1,813 )     -  
      (1,813 )     -  

Deferred income tax (expense) benefit

                

Federal

     973,918       -  

State & Local

     98,749       -  
      1,072,667       -  
                 

Income tax benefit

   $ 1,070,854     $ -  

 

Deferred Income Taxes

 

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities were as follows:

 

   

2021

    

2020

  

Deferred tax assets

                

Net operating losses

   $ 547,035     $ 691,000  

Stock-based compensation

     428,072       -  

Accrued commissions

     50,047       39,600  

Accrued vacations

     41,331       37,600  

Other

     -       2,400  

Deferred tax assets before valuation allowance

     1,066,485       770,600  
                 

Valuation allowance

     -       (746,100 )
                 

Net deferred tax assets

     1,066,485       24,500  
                 

Deferred tax liabilities

                

Intangible Assets

     (2,185,281 )     -  

Fixed Assets

     (3,434 )     (24,500 )

Other

     (45,274 )     -  

Deferred tax liabilities

     (2,233,989 )     (24,500 )
                 

Net deferred assets (liabilities)

   $ (1,167,504 )   $ -  

 

The Company has net operating loss carryforwards of approximately $2.6 million, of which $1.3 million will expire, if unused, between the years 2022 and 2036. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of December 31, 2021, in part because of deferred tax liabilities from the acquisitions referenced in Note 7, management determined that there is sufficient positive evidence to conclude that it is more likely than not that the Company's deferred tax assets are realizable. It therefore reduced the valuation allowance accordingly.

 

The Company has analyzed its income tax positions using the criteria required by U.S. GAAP and concluded that, as of December 31, 2021 and 2020, it has no material uncertain tax positions and no interest and penalties have been accrued. The Company has elected to recognize any estimated penalties and interest on its income tax liabilities as a component of its provision for income taxes.

 

Our income tax returns are subject to examination by income taxing authorities in all jurisdictions for which we file tax returns, generally for three years after each return was filed, but extending to years from which net operating loss carryforwards are utilized to reduce current year taxes. We are not currently under audit in any jurisdiction.