7. Income Taxes

12 Months Ended

Dec. 31, 2013

Income Taxes

7. Income Taxes

The tax effects of significant temporary differences representing deferred tax assets at

December 31, 2013 and 2012, are as follows:

	2013			2012
Deferred tax assets:
Net operating loss carryforward	$	5,514,100		$	5,501,500
Accrued vacation and commissions		334,200			312,200
Fixed assets		46,400			48,100
Allowance for doubtful accounts		-			100
AMT tax credit carryforward		3,600			6,600
Other		8,500			9,700
Subtotal		5,906,800			5,878,200
Valuation allowance		(5,906,800	)		(5,878,200	)
Total	$	-		$	-

The provision for income taxes is at an effective rate different from the federal statutory rate due principally to the following:

	December 31,
	2013			2012
(Loss) income before taxes	$	(60,239	)	$	100,423
Income tax (benefit) expense on above amount at federal statutory rate		(20,500	)		34,100
State income tax (benefit) expense, net of federal (benefit) expense		(2,400	)		4,000
Permanent differences		9,300			7,600
Other		(15,000	)		14,600
Change in valuation allowance		28,600			(60,300	)
Provision for income taxes	$	-		$	-

Income tax expense for the years ended December 31, 2013 and 2012 consists of the following:

	December 31,
Current income taxes	2013			2012
Federal	$	4,100		$	83,900
State		500			9,900
Alternative minimum tax		-			-
Benefit from utilization of net operating losses		(4,600	)		(93,800	)
		-			-
Deferred taxes		-			-
	$	-		$	-

The Company has recorded a valuation allowance to the full extent of its currently available net deferred tax assets which the Company determined to be not more-likely-than-not realizable. The Company has net operating loss carryforwards of approximately $14.5 million, which expire, if unused, between the years 2017 and 2028.

The Company may have been deemed to have experienced changes in ownership which may impose limitations on its ability to utilize net operating loss carryforwards under Section 382 of the Internal Revenue Code.  However, as the deferred tax asset is fully offset by a valuation allowance, the Company has not yet conducted a Section 382 study to determine the extent of any such limitations.

The Company has analyzed its income tax positions using the criteria required by U.S. GAAP and concluded that as of December 31, 2013 and 2012, it has no material uncertain tax positions and no interest or penalties have been accrued.  The Company has elected to recognize any estimated penalties and interest on its income tax liabilities as a component of its provision for income taxes.