FLEXIBLE SOLUTIONS INTERNATIONAL INC Income Taxes Disclosure

12. INCOME TAXES

 

The provision for income tax expense (benefit) is comprised of the following:

 SCHEDULE OF PROVISION FOR INCOME TAX EXPENSE (BENEFIT) 

		2025				2024
Current tax, federal		$	673,742			$	405,475
Current tax, state			50,564				183,429
Current tax, foreign			19,878				115,540
Current tax, total expense			744,184				704,444
Deferred income tax, federal			114,484				101,053
Deferred income tax, state			40,915				45,714
Deferred income tax, foreign			-				-
Deferred income tax, total expense (benefit)			155,399				146,767
Total		$	899,583			$	851,211

 

 

Income taxes paid in cash, net refunds received, during the years ended December 31, 2025 and 2024 were as follows:

 SCHEDULE OF INCOME TAXES PAID IN CASH

United States		$	(107,188	)		$	52,367
State of Illinois			-				-
Canada			927,345				-
Total		$	820,157			$	52,367

 

The following table reconciles the income tax expense at the U.S. Federal statutory rate to income tax expense at the Company’s effective tax rates.

 SCHEDULE OF RECONCILIATION OF INCOME TAXES

			$			%				$				%
		2025							2024
		$				%			$					%
Income before income tax - United States		$	4,561,178						$	4,472,950
Income before income tax - Canada			(627,055	)						479,850
Income before income tax - Panama			(666,745	)						-
Income before income tax			3,267,378							4,952,800
US federal statutory tax rate			686,149			21.0	%			1,040,088				21	%
Illinois state income tax, net of federal tax benefit			344,367			10.5	%			371,708				7.5	%
Foreign tax effects - Canada			151,906			4.7	%			(35,952	)			(0.7	)%
Foreign tax effects – Panama			140,016			4.3	%
Valuation allowance			(49,801	)		(1.5	)%			(395,348	)			(8.0	)%
Nontaxable or nondeductible items:
Income attributable to non-controlling interests in pass-through entities			(410,808	)		(12.6	)%			(283,414	)			(5.7	)
Other			1,314			-	%			64,857				1.3	%
Other adjustments			36,440			1.1	%			89,272				1.8	%
Total		$	899,583			27.5	%		$	851,211				17.2	%

 

Deferred taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes. Deferred tax assets (liabilities) at December 31, 2025 and 2024 are comprised of the following:

 SCHEDULE OF DEFERRED TAX ASSETS (LIABILITIES) 

		2025				2024
Canada
Non-capital loss carryforwards		$	1,225,583			$	1,059,468
Share issuance costs			2,324				1,024
Property, equipment and leaseholds			33,978				27,995
Deferred tax assets gross			1,261,885				1,088,487
Valuation allowance			(1,261,885	)			(1,088,487	)
Net deferred tax asset		$	-			$	-

 

United States
Net operating loss carryforwards		$	2,917			$	190,024
Property, equipment and leaseholds			308,583				502,646
Deferred tax asset			311,500				692,670
Intangible assets			(487,567	)			(516,414	)
Investments			(98,433	)			(105,322	)
Valuation allowance			(2,917	)			(192,953	)
Net deferred tax liability		$	(277,417	)		$	(122,019	)
Panama
Net operating loss carryforwards		$	166,686			$	-
Valuation allowance			(166,686	)			-
Net deferred tax asset			-				-
Net deferred tax liability		$	(277,417	)		$	(122,019	)

 

 

The Company has non-capital loss carryforwards of $5,328,621 which may be carried forward to apply against future year income tax for Canadian income tax purposes, subject to the final determination by taxation authorities, expiring in the following years:

 SCHEDULE OF NON OPERATING LOSS CARRYFORWARDS 

		Loss
2030		$	31,050
2031			908,846
2032			594,293
2037			1,633,234
2039			144,912
2040			415,910
2041			316,051
2042			330,847
2043			233,120
2044			195,057
2045			525,301
Total		$	5,328,621

 

As at December 31, 2025, the Company has federal and state income tax net operating loss carryforwards of $10,234 available for US tax purposes. The NOLs carry forward indefinitely, with utilization limited to offsetting up to 80% of taxable income in any given year.

 

As at December 31, 2025, the Company has income tax net operating loss carryforwards of $666,745 available for Panama tax purposes. The NOLs carry forward five years.

 

The Company’s federal income tax returns for fiscal years 2022 through 2025 remain open and subject to examination.

 

The Company recognizes income tax liabilities from uncertain tax positions where there is uncertainty as to whether a tax position is sustainable using the more-likely-than-not threshold. During the years ended December 31, 2025 and 2024, the total liability for uncertain tax positions changed by $(161,320) and $419,214, respectively, primarily due to increased liabilities based on existing tax positions. As of December 31, 2025 and 2024, the Company has recognized liabilities for uncertain tax positions of $1,964,485 and $2,125,805, respectively, which is included in income taxes payable on the consolidated balance sheets. All recorded uncertain tax positions impact the Company’s effective tax rate.

 

Subsequent to December 31, 2025, based on discussions with its tax consultants, management determined that the Company is responsible for paying income taxes with respect to tax positions taken since 2019. This determination confirms the existence of the liability previously accrued by the Company. The liability recorded as of December 31, 2025 represents management’s best estimate of the obligation based on information available at the balance sheet date. Management is currently working with its tax consultants to assess the full extent of the obligation, and any adjustment to the estimated recorded liability resulting from this process will be reflected in the period in which the change in estimate is identified.

 

Additionally, the Company has accrued interest and penalties related to these tax liabilities, which are recorded as a component of income tax expense (benefit). As of December 31, 2025 and 2024, the Company recorded a change of $277,262 and $333,086 in accrued interest and penalties. At December 31, 2025 and 2024, the Company had accrued cumulative interest and penalties of $1,064,926 and $787,664, respectively, which is included in income taxes payable on the consolidated balance sheets. Given the confirmation of the underlying tax liability, the Company expects that interest and penalties will continue to accrue until the matter is resolved with the taxing authorities.