Toppoint Holdings Inc. Income Taxes Disclosure
NOTE 13: INCOME TAXES
The Company’s provision for income taxes consists of the following for the year ended December 31, 2025 and 2024:
| 2025 | 2024 | |||||||
| Current: | ||||||||
| Federal | $ | 171,949 | $ | 85,688 | ||||
| State and local | ||||||||
| Total current | 171,949 | 85,688 | ||||||
| Deferred: | ||||||||
| Federal | $ | (141,815 | ) | $ | (135,323 | ) | ||
| State and local | (45,294 | ) | (59,785 | ) | ||||
| Total deferred | (187,108 | ) | (195,108 | ) | ||||
| Income tax provision (benefit) | $ | (15,159 | ) | $ | (109,420 | ) | ||
A reconciliation of the federal statutory rate of 21% for the year ended December 31, 2025 and 2024 to the effective rate for (loss) income from operations before income taxes is as follows:
| 2025 | 2024 | |||||||
| Benefit for income taxes at federal statutory rate | 21.00 | % | 21 | % | ||||
| State and local income taxes, net of federal benefit | 6.71 | 6.71 | ||||||
| Meals and entertainment | (0.12 | ) | 5.51 | |||||
| Fines and penalties | 1.26 | |||||||
| Other and prior-year true up | (27.38 | ) | (34.48 | ) | ||||
| Effective income tax rate | (0.21 | )% | % | |||||
The tax effects of these temporary differences along with the net operating losses, net of an allowance for credits, have been recognized as deferred tax assets (liabilities) at December 31, 2025 and 2024 as follows:
| 2025 | 2024 | |||||||
| Net operating loss | $ | 695,067 | $ | 211,248 | ||||
| Accounts and contracts receivable | (472,180 | ) | (391,924 | ) | ||||
| Prepaid expenses | (20,780 | ) | ||||||
| Accounts payable and accrued expenses | 245,192 | 108,076 | ||||||
| Depreciation | (180,167 | ) | (32,696 | ) | ||||
| Stock-based compensation | 1,486,084 | |||||||
| Lease liability | (40,124 | ) | (81,812 | ) | ||||
| Net deferred tax asset (liability) | 1,713,092 | (187,108 | ) | |||||
| Less: valuation allowance | (1,713,092 | ) | ||||||
| $ | $ | (187,108 | ) | |||||
As of December 31, 2025, the Company had a net operating loss carryforward of approximately $2,500,000 for Federal and State tax purposes. The net operating loss will carryforward indefinitely and be available to offset up to 80% of future taxable income each year.
The Company establishes a valuation allowance, if based on the weight of available evidence, it is more likely than not that some portion or all of the deferred assets will not be realized. The Company recorded a valuation allowance against its net deferred tax asset of $1,713,092 as of December 31, 2025.
The Company’s current portion of its provision for income taxes during the year ended December 31, 2025 resulted from a payment for income taxes due with its prior year return.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 25, 2026 | Showing above |
| 2024 | Apr 15, 2025 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.