Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

11. Income Taxes 

a) The income tax expense for the years ended December 31, 2023 and 2022 is reconciled per the schedule below:

	2023			2022
Loss before income taxes	$	(14,929,000	)	$	(12,534,000	)
State income taxes, net of federal benefits		(746,000	)		(627,000	)
Non-deductible portion of meals and entertainment		14,000			41,000
Share base compensation		1,901,000			-
Interest and penalty		-			100,000
Adjusted net loss for tax purposes		(13,760,000	)		(13,020,000	)
Statutory rate		21	%		21	%
		(2,889,000	)		(2,734,000	)
Increase in valuation allowance		2,889,000			2,734,000
Provision for income taxes	$	-		$	-

Worksport Ltd.

Notes to the Consolidated Financial Statements

December 31, 2023 and 2022

11. Income Taxes (continued)

b) Deferred Income Tax Assets

The tax effects of temporary differences that give rise to the deferred income tax assets at December 31, 2023 and 2022 are as follows:

	2023			2022
Net operating loss carry forwards	$	6,005,000		$	3,784,000
Amortization and depreciation		120,000			(98,000	)
Change in operating lease		(3,000	)		(2,000	)
Share base compensation		1,415,000			964,000
		7,537,000			4,648,000
Deferred tax assets not recognized		(7,537,000	)		(4,648,000	)
Net deferred tax asset	$	-		$	-

Deferred income taxes within each jurisdiction on the balance sheets at December 31, 2023 and 2022 are as follows:

	2023			2022
United States	$	4,201,000		$	2,103,000
Canada		3,336,000			2,545,000
Valuation allowance		(7,537,000	)		(4,648,000	)
	$	-		$	-

c) Cumulative Net Operating Losses

The Company has non-capital losses carried forward of approximately $28,594,000 available to reduce future years’ taxable income. These losses will expire as follows:

	United States		Canada		Total
2034	$	53,000	$	183,000	$	236,000
2035		161,000		368,000		529,000
2036		868,000		262,000		1,130,000
2037		1,472,000		59,000		1,531,000
2038		-		520,000		520,000
2039		-		193,000		193,000
2040		-		718,000		718,000
2041		-		3,000,000		3,000,000
2042		-		4,100,000		4,100,000
2043		-		3,140,000		3,140,000
	$	2,554,000	$	12,543,000	$	15,097,000
Never expire	$	13,497,000	$	-	$	13,497,000

Net operating loss carryforwards of approximately $28,594,000 may be offset against future taxable income. No tax benefit from these losses have been reported in the December 31, 2023 consolidated financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

Worksport Ltd.

Notes to the Consolidated Financial Statements

December 31, 2023 and 2022

11. Income Taxes (continued)

Due to change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carryforwards may be limited as to use in future years.

The Company complies with the provisions of FASB ASC 740 in accounting for its uncertain tax positions. ASC 740 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more –likely –than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company has determined that the Company has no significant uncertain tax positions requiring recognition under ASC 740.

The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Company had no accruals for interest and tax penalties at December 31, 2023 and 2022.

The Company does not expect the amount of unrecognized tax benefits to materially change within the next twelve months.

The Company is required to file income tax returns in the U.S. and Canadian Federal jurisdictions, as well as various states and in the province of Ontario. The Company is no longer subject to income tax examinations by tax authorities for tax years ending before December 31, 2020 in the United States and for tax years ending before December 31, 2014 in Canada.