KORU Medical Systems, Inc. Income Taxes Disclosure

NOTE 7 — FEDERAL AND STATE INCOME TAXES

 

Domestic and international pre-tax income/(loss) consists of the following:

Schedule of Components of Domestic and International Pre-Tax Income (Loss)

		Year Ended December 31, 2025			Year Ended December 31, 2024
United States		$	(2,616,036	)	$	(6,063,740	)
Loss before income taxes		$	(2,616,036	)	$	(6,063,740	)

 

Income tax expense attributable to operations is comprised of the following:

Schedule of provision for income taxes

		Year Ended December 31, 2025			Year Ended December 31, 2024
Current:
Federal		$	(1,276	)	$	—
State			(20,614	)		(2,893	)
International			—			—
Total Current			(21,890	)		(2,893	)
Deferred:
Federal			—			—
State			—			—
International			—			—
Total Deferred			—			—
Income Tax Expense		$	(21,890	)	$	(2,893	)

 

Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. Significant components of our deferred tax assets and liabilities are as follows:

Schedule of components of deferred tax assets 

		December 31, 2025			December 31, 2024
Deferred Tax Assets:
Net Operating Loss		$	4,984,118		$	4,025,905
Credits			113,204			129,598
Capitalized Research Costs			1,276,364			2,451,496
NQO & RSA Stock Options			517,418			350,484
Deferred Lease Liability			830,800			647,446
Accruals & Reserves			694,279			712,058
Other			—			48
Gross Deferred Tax Asset			8,416,183			8,317,035
Valuation allowance			(7,053,948	)		(7,080,843	)
Total Deferred Tax Asset		$	1,362,235		$	1,236,192
Deferred Tax Liabilities:
Intangibles			(61,596	)		(58,170	)
ROU Assets			(747,412	)		(538,632	)
Fixed Assets			(553,227	)		(639,390	)
Total Deferred Tax Liabilities			(1,362,235	)		(1,236,192	)
Net Deferred Tax Asset		$	—		$	—

 

Management regularly assesses the ability to realize deferred tax assets recorded based upon the weight of available evidence, including such factors as recent earnings history and expected future taxable income on a jurisdiction by jurisdiction basis. In the event that the Company changes its determination as to the amount of realizable deferred tax assets, the Company will adjust its valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made. The Company’s management believes that, based on a number of factors, it is more likely than not, that all or some portion of the deferred tax assets will not be realized; and accordingly, for the year ended December 31, 2025 the Company has provided a full valuation allowance against the Company’s U.S. net deferred tax assets. The net change in the valuation allowance for the year ended December 31, 2025 was a decrease of $26,895.

 

As of December 31, 2025, the Company had net operating loss carryforwards for federal and state income tax purposes of approximately $22,514,225 and $4,393,561, respectively. The state net operating loss carryforwards will begin to expire in 2041 and our federal net operating loss carryforward will last indefinitely.

 

As of December 31, 2025, the Company had federal and state research credit carryforwards of approximately $113,204 and $0 respectively. The federal research credit carryforwards will begin to expire in 2036.

 

As of December 31, 2025, and 2024 the Company had no gross unrecognized tax benefits. The Company’s policy is to recognize accrued interest and penalties related to unrecognized income tax benefits in the Provision for income taxes should such amounts occur in future periods.

 

The Company files income tax returns in the US federal and various state jurisdictions with varying statutes of limitations. Tax years 2022 through 2024 are open to examination by major taxing jurisdictions to which the Company is subject.

 

A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes for years prior to the adoption of ASU 2023-09 is as follows:

Schedule of Effective Income Tax Rate Reconciliation

		Year Ended December 31, 2024
Federal tax at statutory rate		$	1,272,820
State income taxes			184,595
Valuation allowance			(1,078,066	)
Deferred tax true ups			(352,653	)
Other items			(29,589	)
Total			(2,893	)

 

A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes for years after the adoption of ASU 2023-09 is as follows:

 

		Year Ended December 31, 2025			Percent
Federal tax at statutory rate		$	549,368		21.0%
State and Local Income Taxes (1)			(20,614	)	(0.8%	)
Nontaxable or Nondeductible Items
Stock Based Compensation			(41,305	)	(1.6%	)
Other			(99,899	)	(3.8%	)
Change in Valuation Allowance			(146,633	)	(5.6%	)
Deferred tax true ups			(262,807	)	(10.0%	)
Total			(21,890	)	(0.8%	)

(1)	State Taxes in Texas made up the majority (greater than 50%) of the tax effect in this category

 

The amount of cash income taxes paid by the Company were as follows:

 

		Year Ended December 31, 2025
Federal		$	5,000
State and Local
Pennsylvania			9,200
All other State and Local			650
Total			14,850

 

The Company did not pay any income tax during the year ended December 31, 2024.