Annual report pursuant to Section 13 and 15(d)

7. Income Taxes

v3.3.1.900
7. Income Taxes
 12 Months Ended
Dec. 31, 2015
Income Taxes  
7. Income Taxes

The tax effects of significant temporary differences representing deferred tax assets at December 31, 2015 and 2014, are as follows:

 

    2015     2014  
Deferred tax assets:            
     Net operating loss carryforward   $ 5,453,200     $ 5,468,700  
     Accrued commissions     324,600       347,600  
     Fixed assets     48,200       48,100  
     Accrued vacation     35,900       31,900  
     Allowance for doubtful accounts     -       300  
     AMT tax credit carryforward     6,600       600  
     Other     8,000       8,800  
Subtotal     5,876,500       5,906,000  
Valuation allowance     (5,876,500 )     (5,906,000 )
Total   $ -     $ -  

 

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

 

    December 31,  
    2015     2014  
Income (loss) before taxes   $ 78,330     $ (29,787 )
Income tax expense (benefit) on above amount at federal statutory rate   $ 26,600     $ (10,100 )
State income tax expense (benefit), net of federal expense (benefit)     3,100       (1,200 )
Permanent differences     6,600       8,500  
Other     (6,800 )     3,700  
Change in valuation allowance     (29,500 )     (900 )
Provision for income taxes   $ -     $ -  

 

Income tax expense for the years ended December 31, 2015 and 2014 consists of the following:

 

    December 31,  
Current income taxes   2015     2014  
Federal   $ 13,800     $ -  
State     1,600       -  
Alternative minimum tax     -       -  
Benefit from utilization of net operating losses     (15,400 )     -  
      -       -  
Deferred taxes     -       -  
    $ -     $ -  

 

The Company has recorded 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 $14.4 million, which expire, if unused, between the years 2017 and 2029.

 

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 U.S. GAAP and concluded that as of December 31, 2015 and 2014, 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.

 

The income tax returns of the Company for 2012, 2013, and 2014 are subject to examination by income taxing authorities, generally for three years after each was filed.