Income Taxes

12 Months Ended

Dec. 31, 2012

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, 2012 and 2011:

	2012			2011
Deferred:
Federal	$	(535,089	)	$	(563,837	)
State and local		(406,952	)		(144,204	)
Total deferred		(942,041	)		(708,041	)
Total benefit for income taxes		(942,041	)		(708,041	)
Less: valuation reserve		942,041			708,041
Income Tax provision	$	-		$	-

A reconciliation of the federal statutory rate of 0% for the year ended December 31, 2012 and 2011 to the effective rate for income from operations before income taxes is as follows:

	2012			2011
Benefit for income taxes at federal statutory rate		34.0	%		34.0	%
State and local income taxes, net of federal benefit		10.6			5.3
Differences attributable to change in state business apportionment		7.0
Other		1.7			(2.2	)
Less valuation allowance		(53.3	)		(37.1	)
Effective income tax rate		0.0	%		0.0	%

The Company adjusted its estimate of business apportionment, thus increasing its effective state tax rate from 5.3% to 10.6%. The increase is primarily due to allocation of business receipts to New York State and New York City.

The temporary differences between recognition of expenses on the consolidated financial statements and tax return relate primarily to differences in depreciation methods and change in allowance for doubtful accounts.

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 at December 31, 2012 and 2011 as follows:

	2012			2011
Net operating loss carryforward	$	1,443,296		$	799,408
Bad debt reserve		75,163			17,289
Employee stock compensation		334,393			94,688
Depreciation		(370	)		(944	)
Total before valuation reserve		1,852,482			910,441
Less valuation reserve		(1,852,482	)		(910,441	)
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 $942,041 and $708,041 during 2012 and 2011, respectively, offsetting the increase in the deferred tax asset attributable to the net operating loss and reserves.

As of December 31, 2012, the Company has a net operating loss carry forward of approximately $3,200,000 for Federal tax purposes.  The net operating loss expires through 2032.

The Company recognizes interest and penalties related to uncertain tax positions in general and administrative expenses. As of December 31, 2012, the Company has no unrecognized tax positions, including interest and penalties. The tax years 2008-2011 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.