Fathom Holdings Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income Taxes

Income Taxes

12 Months Ended

Dec. 31, 2020

Income Taxes

Income Taxes

Note 16. Income Taxes

The provision for income taxes consists of the following:


	December 31,
	2020		2019
Current (provision) benefit:
Federal	$	—	$	—
State		37,514		8,000
Total Current		37,514		8,000
Deferred provision benefit:
Federal		(37,580)		—
State		(8,405)		—
Total deferred		(45,985)		—
Income tax benefit	$	8,471	$	8,000

A reconciliation of the statutory U.S. federal rate to the Company’s effective tax rate consists of the following:


	For the Years Ended December 31,
	2020			2019
Provision for federal income taxes at statutory rates	283,974	(21)	%	861,062		(21)	%
Provision for state income taxes, net of federal benefit	(186)	—	%	79,435		(2)	%
Change in valuation allowance	(271,799)	20	%	(926,681)		23	%
Nondeductible expenses	(4,199)	—	%	(7,437)		—	%
Return to provision adjustments	740	—	%	2,172		—	%
Other	(59)	—	%	(551)		—	%
Income tax benefit	8,471	1	%	8,000		—	%
Effective Tax Rate		0.63	%	0.20	%

The tax effects of the temporary differences and carryforwards that give rise to the deferred tax assets consist of the following:


	December 31,
	2020		2019
Deferred tax assets
Net Operating Loss Carryforward	$	2,103,091	$	1,469,052
Property and equipment		6,207		430
Intangibles		(38,952)		—
Reserves		14,859		—
Interest Expense Carryforward		52,965		33,741
Lease liability		100,705		60,843
Charitable Contributions Carryover		5,197		5,189
Total deferred tax assets		2,244,072		1,569,255
Deferred tax liabilities
Internally Developed Software		(172,780)		(105,869)
Stock Compensation		(125,670)		(19,093)
Right-of-Use Assets		(99,768)		(60,386)
Prepaid Expenses		(197,599)		(7,453)
Total deferred tax liabilities		(595,817)		(192,801)
Valuation Allowance		(1,648,255)		(1,376,454)
Deferred tax asset, net	$	—	$	—

As of December 31, 2020, and December 31, 2019, the Company had federal net operating loss carryforwards of approximately $9.2 million and $6.2 million and state net operating loss carryforwards of approximately $4.5 million and $3.0 million, respectively. Losses will begin to expire, if not utilized, in 2032. Utilization of the net operating loss carryforwards may be subject to an annual limitation according to Section 382 of the Internal Revenue Code of 1986 as amended, and similar provisions.

The Company applies the standards on uncertainty in income taxes contained in ASC Topic 740, Accounting for Income Taxes. The adoption of this interpretation did not have any impact on the Company’s consolidated financial statements, as the Company did not have any significant unrecognized tax benefits during the years ended December 31, 2020 and 2019. Currently, the statute of limitations remains open subsequent to and including the year ended December 31, 2016.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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