Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.6
Income Taxes
 12 Months Ended
Dec. 31, 2011
Notes to Financial Statements  
Note 7 - Income Taxes

The tax effects of significant temporary differences representing deferred tax assets and deferred tax liabilities at December 31, 2011 and 2010, are as follows:

 

    2011     2010  
Deferred tax assets (liabilities):            
     Net operating loss carryforward   $ 5,559,500     $ 5,751,200  
     Accrued vacation and commissions     261,800       175,900  
     Fixed assets     46,100       47,700  
     Allowance for doubtful accounts     53,400       8,400  
     AMT tax credit carryforward     9,500       7,000  
     Other     8,200       9,600  
Subtotal     5,938,500       5,999,800  
Valuation allowance     (5,938,500 )     (5,999,800 )
Total   $ -     $ -  

 

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

 

    December 31,  
    2011     2010  
Income before taxes   $ 156,201     $ 146,462  
Income tax expense (benefit) on above amount at federal statutory rate     53,100       49,800  
State income tax expense (benefit), net of federal expense (benefit)     6,200       5,800  
Permanent differences     5,600       5,500  
Other     (800 )     (500 )
Change in valuation allowance     (61,300 )     (60,300 )
Provision for income taxes   $ 2,800     $ 300  

 

Income tax for the years ended December 31, 2011 and 2010 consists of the following:

 

    December 31,  
Current income taxes   2011     2010  
Federal   $ 179,000     $ 144,000  
State     21,100       16,900  
Alternative minimum tax     2,800       400  
Benefit from utilization of net operating losses     (200,100 )     (160,900 )
      2,800       400  
Deferred taxes     -       -  
    $ 2,800     $ 400  

 

The Company has recognized a valuation allowance to the full extent of its currently available net deferred tax assets which the Company determined to be not more-likely-than-not realizable. The Company has net operating loss carryforwards of approximately $14.6 million, which expire, if unused, between the years 2012 and 2028.

 

The Company may have been deemed to have experienced changes in ownership which may impose limitations on its ability to utilize net operating loss carryforwards under Section 382 of the internal Revenue Code.  However,as the deferred tax asset is fully offset by a valuation allowance, the Company has not yet conducted a Section 382 study to determine the extent of any such limitations.

 

The Company has analyzed its income tax positions using the criteria required by financial accounting standards and concluded that as of December 31, 2011 and 2010, it has no material uncertain tax positions and no interest or 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.