INCOME TAXES

12 Months Ended

Dec. 31, 2020

Dec. 31, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 14 - INCOME TAXES

The provision for federal and state income taxes for the years ended is as follows:

	2020		2019
Current provision:
Federal	$	53,265	$	113,786
State		993		5,671
Deferred provision (benefit):
Federal	$	12,110	$	(12,110	)
State		486		(486	)
Total Deferred		12,596		(12,596	)
Total provision for income taxes	$	66,854	$	106,861

There is no current or deferred tax expense for 2020 with the exception of a true up adjustment from the prior year, due to the Company’s loss position. Realization of the future tax benefits related to the deferred tax assets is dependent on many factors, including the Company’s ability to generate taxable income within the net operating loss carryforward period. Management has considered these factors in reaching its conclusion as to the valuation allowance for financial reporting purposes and has recorded a full valuation allowance against the deferred tax asset.

The income tax effect of temporary differences comprising the deferred tax assets and deferred tax liabilities is a result of the following at December 31:

	2020			2019
Deferred tax assets:
Net operating loss	$	299,088		$	—
Amortization and start up costs		—			12,596
Stock based compensation		189,883			—
Accrual to cash conversion		367,289			—
Total		856,260			12,596
Valuation allowance		(856,260	)		—
Net	$	—		$	12,596

The income tax provision differs from the expense that would result from applying federal statutory rates to income before income taxes because the Company is subject to state income taxes, deferred income taxes are based on average tax rates and a portion of gifts and meals and entertainment are not tax deductible. A valuation allowance has been provided to reduce deferred tax assets to an amount that is more likely than not to be realized.

Prior to the share exchange, Munn Works, LLC was taxed as a single member Limited Liability Company for federal and state income tax purposes. As such, the Company will not pay income taxes for earnings prior to the share exchange, as any income or loss will be included in the tax returns of the individual member. Accordingly, no provision is made for income taxes in the financial statements prior to the share exchange.

Effective tax rates differ from the federal statutory rate of 21% applied to income before provision for income taxes due to the following:

	2020			2019
Federal statutory rate times financial statement income	$	(677,930	)	$	610,746
Less: Tax Rate applied to pre share exchange earnings		—			(501,233	)
Permanent tax basis differences		613			(7,838	)
Deferred true up		38,048			—
State taxable income, net		(205,098	)		5,186
Change in Valuation allowance		856,520			—
True up		54,258			—
Other		443			—
Total provision for income taxes	$	66,854		$	106,861

The Company has available net operating loss approximately $1,094,000 for tax purposes to offset future taxable income . Pursuant to the Tax Reform Act of 1986, annual utilization of the Company’s net operating loss and contribution carryforwards may be limited if a cumulative change in ownership of more than 50% is deemed to occur within any three-year period. The tax years 2017 through 2020 remain open to examination by federal agencies and other jurisdictions in which it operates.

NOTE 13 - INCOME TAXES

The provision for federal and state income taxes for the years ended is as follows:

	2019			2018
Current provision:
Federal	$	113,786		$	—
State		5,671			—
Deferred provision (benefit):
Federal	$	(12,110	)	$	—
State		(486	)		—
Total Deferred		(12,596	)		—
Total provision for income taxes	$	106,861		$	—

The income tax provision differs from the expense that would result from applying federal statutory rates to income before income taxes because the Company is subject to state income taxes, deferred income taxes are based on average tax rates and a portion of gifts and meals and entertainment are not tax deductible. A valuation allowance has been provided to reduce deferred tax assets to an amount that is more likely than not to be realized.

On December 22, 2017, the U.S. federal government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act, or the Tax Act. The Tax Act makes broad and complex changes to the U.S. federal tax code, including, but not limited to reducing the U.S. federal corporate tax rate from 35 percent to 21 percent, effective January 1, 2018.

Prior to the share exchange, Munn Works, LLC was taxed as a single member Limited Liability Company for federal and state income tax purposes. As such, the Company will not pay income taxes for earnings prior to the share exchange, as any income or loss will be included in the tax returns of the individual member. Accordingly, no provision is made for income taxes in the financial statements prior to the share exchange.

Effective tax rates differ from the federal statutory rate of 21% applied to income before provision for income taxes due to the following:

	2019			2018
Federal statutory rate times financial statement income	$	610,746		$	151,251
Less: Tax Rate applied to pre share exchange earnings		(501,233	)		(151,251	)
Permanent tax basis differences		(7,838	)		—
State taxable income		5,186			—
Total provision for income taxes	$	106,861		$	—