Income Taxes

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 7: INCOME TAXES

The components of income tax benefit for the fiscal years ended December 31, 2016 and January 2, 2016 are as follows:

	December 31, 2016		January 2, 2016
Current:
Federal	$	19	$	(62	)
State		9		(16	)
Total income tax expense (benefit)	$	28	$	(78	)

A reconciliation between the expected federal tax expense at the statutory tax rate of 34% and the Company’s actual tax expense for the fiscal years ended December 31, 2016 and January 2, 2016 follows:

	December 31, 2016			January 2, 2016
Income tax expense computed at federal statutory rate	$	153		$	(245	)
State income taxes, net of federal income tax benefit		9			2
Permanent items		10			9
Change in federal valuation allowance		(176	)		238
Increase (reduction) in unrecognized tax position		19			(82	)
Other		13			—
	$	28		$	(78	)

Deferred tax assets for the fiscal years ended December 31, 2016 and January 2, 2016 consist of the following components:

	December 31, 2016			January 2, 2016
Allowance for doubtful accounts	$	133		$	114
Inventory		29			31
Federal and state net operating loss		467			685
Other		53			39
Valuation allowance		(682	)		(869	)
Deferred tax asset	$	—		$	—

At December 31, 2016, the Company has $1,254 of federal net operating loss carryforwards and $2,058 of state net operating loss carryforwards, which will begin to expire in 2032.

Management has concluded that based upon all available evidence it is more likely than not that deferred tax assets will not be utilized. The Company has recorded a decrease in the federal and state valuation allowances in the amount of $187 during the year ended December 31, 2016. The remaining deferred tax asset is offset by the federal unrecorded tax benefit.

The Company will recognize a tax benefit in the financial statements for an uncertain tax position only if management’s assessment is that the position is “more likely than not” (i.e., a likelihood greater than 50 percent) to be allowed by the tax jurisdiction based solely on the technical merits of the position. The term “tax position” refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for financial reporting purposes.

The following table indicates the changes to the Company’s uncertain tax positions for the fiscal years ended December 31, 2016 and January 2, 2016:

Balance at December 27, 2014	$	169
Reduction due to the expiration of the statute of  limitations and tax positions related to prior years		(52	)
Balance at January 2, 2016	$	117
Increase due to increase in reserves and tax positions related to prior years		19
Balance at December 31, 2016		136

The Company accounts for penalties or interest related to uncertain tax positions as part of its provision for income taxes. The Company had approximately $2 and $2 of accrued interest and penalties related to uncertain tax positions at December 31, 2016 and January 2, 2016, respectively. The amount of uncertain tax positions that would affect the effective tax rate if they were recognized is $136.

The liability at December 31, 2016 for uncertain tax positions is included in accrued expenses. The Company’s federal and state tax returns are open to examination for the years 2013 to 2016.