INCOME TAXES

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 12 - INCOME TAXES

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

Schedule of federal and state income
	2021			2020
Current provision:
Federal	$	(110,234	)	$	53,265
State		18,415			993
Deferred provision (benefit):
Federal	$	—		$	12,110
State		—			486
Total Deferred		—			12,596
Total provision for income taxes	$	91,819		$	66,854

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:

Schedule of deferred tax assets and deferred tax liabilities
	2021			2020
Deferred tax assets:
Net operating loss	$	1,732,422		$	299,088
Fixed assets		14,493			—
Lease		1,201			—
Loss on contingency		130,765			—
Intangible assets		1,707			—
Stock based compensation		284,468			189,883
Accrual to cash conversion		216,068			367,289
Total		2,381,124			856,260
Valuation allowance		(2,381,124	)		(856,260	)
Net	$	—		$	—

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. In addition, the foregiveness of PPP loan of $296,826 is not taxable income.

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:

Schedule of income before provision for income taxes
	2021			2020
Federal statutory rate times financial statement income	$	(1,552,673	)	$	(677,930	)
Permanent tax basis differences		(72,997	)		613
Deferred true up		13,911			38,048
State taxable income, net		(86,700	)		(205,098	)
Change in Valuation allowance		1,524,637			856,520
Rate change		154,179
True up		(91,819	)		54,258
Other		19,643			443
Total provision for income taxes	$	(91,819	)	$	66,854

The Company has available net operating loss approximately $9,054,000 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 2018 through 2020 remain open to examination by federal agencies and other jurisdictions in which it operates.