Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 13 – Income Taxes

The provision for income taxes for the years ended December 31, 2022 and 2021 consists of the following:

	Year Ended December 31, 2022			Year Ended December 31, 2021
Current
Federal	$	(301,766	)	$	(14,860	)
State		(11,083	)		(164,670	)
		(312,849	)		(179,530	)
Deferred
Federal		-			-
State		-			-
		-			-
Provision for income taxes	$	(312,849	)	$	(179,530	)

The following reconciles the Federal statutory income tax rate to the Company’s effective tax rate for the years ended December 31, 2022 and 2021:

	Year Ended December 31, 2022			Year Ended December 31, 2021
	%			%
Federal statutory rate		21.0			21.0
Permanent and other items		(17.0	)		0.6
Federal income taxes audit and other adjustments		-			63.5
Change in valuation allowance		(14.5	)		(81.6	)
		(10.5	)		3.5

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. In assessing the realizability of deferred tax assets, management evaluates whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on Management’s evaluation, it is more likely than not that the deferred tax asset will not be realized and as such a valuation allowance has been recorded as of December 31, 2022 and 2021.

Deferred tax assets and liabilities are comprised of the following at December 31, 2022 and 2021:

	December 31, 2022			December 31, 2021
Deferred income tax assets:
Amortization	$	375,821		$	460,537
Net operating loss carryforward		15,445,916			15,164,992
Allowance for doubtful accounts		387,818			401,436
Charitable contributions		644			644
Stock options		1,003,453			1,003,453
Accrued liabilities		1,826,839			1,711,890
HHS Provider Relief Funds		67,685			-
Employee retention credit		292,282			292,282
HTS and AMSG basis difference		878,709			878,709
Deferred state tax asset		4,089,682			3,683,024
		24,368,849			23,596,967
Deferred income tax liabilities:
Depreciation		( 583,812	)		(691,456	)
Deferred tax asset, net		23,785,037			22,905,511
Less: valuation allowance		(23,785,037	)		(22,905,511	)
Net deferred tax assets	$	-		$	-

Management has reviewed the provisions regarding assessment of its valuation allowance on deferred tax assets and based on that criteria determined that it should record a valuation allowance of $23.8 million and $22.9 million against its net deferred tax assets as of December 31, 2022 and 2021, respectively. The Company has federal net operating loss carryforwards totaling approximately $73.6 million generated since 2016. It also has various state net operating loss carryforwards that begin to expire in 2032. The Company believes that a Section 382 limitation may exist for a portion of its net operating losses but at this time has not identified to which losses these limitations would relate.

During the year ended December 31, 2020, the U.S. Congress approved the CARES Act, which allows a five-year carryback privilege for federal net operating tax losses that arose in a tax year beginning in 2018 and through 2020. As a result, during the year ended December 31, 2020, the Company recorded approximately $1.1 million in refunds from the carryback of certain of its federal net operating losses. During the year ended December 31, 2021, the Company received income tax refunds of $0.3 million, which represented income tax refunds associated with the CARES Act. The Company used the $0.3 million of refunds that it received in 2021 to repay a portion of the amount that it owes for federal tax liabilities that arose from the Company’s 2015 federal income tax audit. At December 31, 2022, the Company had federal income tax receivables of $0.8 million and federal tax liabilities of $0.7 million and it had state tax liabilities totaling $0.6 million.

The Company recognizes the consolidated financial statement impact of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than–not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

The Company is subject to income taxes in the U.S. federal jurisdiction and the states of Florida, North Carolina, New Mexico, New Jersey, California, Kentucky and Tennessee. The tax regulations within each jurisdiction are subject to interpretation of related tax laws and regulations and require significant judgment to apply.