Annual report pursuant to Section 13 and 15(d)

Note 10 - Income Tax

v3.22.2.2
Note 10 - Income Tax
 12 Months Ended
Dec. 31, 2021
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

NOTE 10 – INCOME TAX

 

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Tax calculations assume a U.S. federal income tax rate of 21% and a Calilfornia tax rate of 8.84%.

 

Net deferred tax assets consist of the following components as of December 31:

 

   

2021

    

2020

  

Deferred Tax Assets:

                

NOL Carryover

   $ 1,778,504     $ 1,295,500  

Related party accrual

     56,533       75,400  

Depreciation

     -       (800 )

   Payroll accrual

     -       18,800  

Deferred tax liabilities:

     -       -  

Less valuation allowance

     (1,835,037 )     (1,388,900 )

Net deferred tax assets

   $ -     $ -  

 

The income tax provision for the years ended December 31 are comprised of:

 

   

2021

    

2020

  
Current federal
  $ (427,754 )   $ 116,065  
Current state
    (142,250 )     27,635  
Deferred federal
    -       -  
Deferred state
    -       -  

Valuation allowance

     570,004       (143,700

)

Provision for income tax

   $ -     $ -  

 

The income tax provision differs from the amount of income tax determined by applying the U.S. federal and effective state income tax rates to pretax income from continuing operations for the period ended December 31, due to the following:

 

   

2021

    

2020

  
Book income (loss)   $ (629,957 )   $ 141,300  

Meals and entertainment

     -       -  

Other nondeductible expenses

     59,953       2,400  

Valuation allowance

     570,004       (143,700

)

Provision for income tax

   $ -     $ -  

 

At December 31, 2021, the Company had federal net operating loss carry forwards of approximately $6,356,000 including approximately $4,337,000 from periods prior to 2017 that may be offset against future taxable income through 2036. Net operating losses from 2017 and later carry an indefinite life. No tax benefit has been reported in the December 31, 2021 consolidated financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.  At December 31, 2021, the Company had state net operating loss carry forwards of approximately $3,289,000 that may be offset against future taxable income through 2041.   

 

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal Income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years. With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2016.