DUOS TECHNOLOGIES GROUP, INC. Income Taxes Disclosure

NOTE 14 – INCOME TAXES

 

The Company maintains deferred tax assets and liabilities that 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. The deferred tax assets (liabilities) at December 31, 2025 and 2024 consist of net operating loss carryforwards and differences in the book basis and tax basis of intangible assets.

 

In accordance with the adoption of ASU 2023-09, the Company has retroactively adjusted 2024 details below to comply with the standard.

 

The items accounting for the difference between income taxes at the effective statutory rate and the provision for income taxes for the years ended December 31, 2025 and 2024 were as follows:

Schedule of difference between income taxes at effective statutory rate and provision for income taxes
		Years Ended December 31,
Rate Reconciliation		2025								2024
		Amount				Percent				Amount				Percent
Income tax expense (benefit) at U.S. Statutory rate at 21%		$	(2,065,356	)			21.00	%		$	(2,260,536	)			21.00	%
1. State and Local Income Taxes			(70,402	)			0.72	%			(387,520	)			3.60	%
2. Foreign Tax Effects			—				0.00	%			—				0.00	%
3. Change in Tax Laws and Rates			—				0.00	%			—				0.00	%
4. Effects of Cross-Border Tax Laws			—				0.00	%			—				0.00	%
5. Federal Tax Credits			—				0.00	%			—				0.00	%
6. Domestic Change in VA			2,443,828				-24.845	%			2,483,901				-23.08	%
7. Nontaxable or Nondeductible Items
Stock Based Compensation		$	826,170				-8.40	%		$	67,398				-0.63	%
Other Permanent Differences			54,810				-0.56	%			96,757				-0.90	%
Total Nontaxable/Nondeductible Items		$	880,980				-8.96	%		$	164,155				-1.52	%
8. Changes in Unrecognized Tax Benefits			—				0	%			—				0.00	%
9. Other Items
True-Up of Deferred Taxes			(1,189,050	)			12.09	%			—				0.00	%
Other Items (Note: should not be material)			—				—				—				0.00	%
Total Provision for income tax			—				-0.00	%			—				0.00	%

 

The Company’s approximate net deferred tax assets as of December 31, 2025 and 2024 were as follows:

Schedule of deferred tax assets
		Years Ended December 31,
Current Tax Expense (Benefit)		2025				2024
Federal		—				—
State			—				—
Current Tax Expense (Benefit)			—				—

 

			Years Ended December 31,
Deferred Tax Expense (Benefit)			2025				2024
Federal			—				—
State			—				—
Deferred Tax Expense (Benefit)			—				—
Total Income Tax Expense (Benefit)			—				—
Pre-Tax Book Income		$	(9,835,031	)		$	(10,764,457	)

 

Schedule of net deferred tax assets
		Years Ended
		2025				2024
Deferred Tax Assets:
Bad Debt Reserve		$	41,410			$	—
Accruals			41,981				—
Leases			158,032				—
Net Operating Loss Carryforwards			17,605,705				15,313,305
Total Deferred Tax Assets		$	17,847,128			$	15,313,305
Less: Valuation Allowance			(17,514,268	)			(14,717,913	)
Deferred Tax Assets Net		$	332,860			$	595,393
Deferred Tax Liabilities:
Intangibles Assets		$	(24,672	)		$	(537,018	)
Bad Debt Reserve							(58,375	)
Property and equipment			(128,883	)			—
Other			(179,305	)
Total Deferred Tax Liabilities		$	(332,860	)		$	(595,393	)
Net Deferred Tax Asset (Liabilities)		$	—			$	—

 

At December 31, 2025 and 2024, the Company had federal gross net operating loss (“NOL”) carryforwards of approximately $71.5 million and $65.9 million, respectively, and state gross NOL carryforwards of approximately $46.9 million and $41.5 million, respectively.

 

The Company has recorded a valuation allowance equal to its net deferred tax assets for the years ended December 31, 2025 and 2024, as it is not more likely than not that sufficient future taxable income will be available to realize the benefit of the NOL carryforwards and other deferred tax assets. The valuation allowance increased by approximately $2.8 million during the year ended December 31, 2025.

 

NOL carryforwards generated prior to January 1, 2018, resulted in a potential tax benefit of approximately $4.4 million and will expire in 2037 if not utilized. NOL carryforwards generated after January 1, 2018, resulted in a potential tax benefit of approximately $10.6 million and may be carried forward indefinitely, subject to applicable annual utilization limitations. The utilization of the Company’s NOL carryforwards may be subject to annual limitations under Internal Revenue Code Section 382 as a result of ownership changes or other events. The Company has not performed a formal study to assess the impact of such limitations. If it is subsequently determined that all or a portion of the NOL carryforwards will not be realizable due to these limitations or expiration, the deferred tax assets would be reduced with a corresponding adjustment to the valuation allowance. The Company has no unrecognized tax benefits as of December 31, 2025. The Company’s federal income tax returns for the years ended December 31, 2024, 2023, and 2022 remain subject to examination by the Internal Revenue Service. The Company has not performed a formal study to assess the impact of such limitations. If it is subsequently determined that all or a portion of the NOL carryforwards will not be realizable due to these limitations or expiration, the deferred tax assets would be reduced with a corresponding adjustment to the valuation allowance.