Income Taxes

12 Months Ended

Sep. 30, 2019

14.

INCOME TAXES

As of September 30, 2019, the Company has approximately $2,190,855 (2018 – $6,442,069) of operating losses expiring through 2039 that may be used to offset future taxable income but are subject to various limitations imposed by rules and regulations of the Internal Revenue Service. The net operating losses are limited each year to offset future taxable income, if any, due to the change of ownership in the Company's outstanding shares of common stock. In addition, at September 30, 2019, the Company had an unused Canadian net operating loss carry-forward of approximately $7,865,973 (2018 – $8,096,433), expiring through 2039. These operating loss carry-forwards may result in future income tax benefits of approximately $2,269,253. However, because realization is uncertain at this time, a valuation reserve in the same amount has been established. Deferred income taxes 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 components of the net deferred tax asset, the statutory tax rate, the effective rate and the elected amount of the valuation allowance are as follows:

	Year Ended September 30, 2019			Year Ended September 30, 2018
Statutory and effective tax rate
Domestic
Statutory U.S. federal rate		21	%		21	%
Foreign		26.75	%		27	%

	Year Ended September 30, 2019			Year Ended September 30, 2018
Income taxes recovered at the statutory and effective tax rate
Domestic
Statutory U.S. federal rate	$	24,637		$	28,484
Foreign		21,347			52,513

Timing differences:
Non-deductible expenses		(12,534	)		(21,102	)
Other deductible charges
Benefit of tax losses not recognized in the year		(33,450	)		(59,895	)
Income tax recovery (expense) recognized in the year	$	–		$	–

The approximate tax effects of each type of temporary difference that gives rise to deferred tax assets are as follows:

	Year Ended September 30, 2019			Year Ended September 30, 2018
Deferred income tax assets (liabilities)
Net operating loss carry-forwards	$	2,563,850		$	3,538,871
Oil and gas properties		(2,043,926	)		(1,936,342	)
Equipment		204,147			209,647
Valuation allowance		(724,071	)		(1,812,176	)
Net deferred income tax assets	$	–		$	–

In accordance with generally accepted accounting principles, the Company has its filing positions in all jurisdictions where it is required to file income tax returns for the open tax years in such jurisdictions. The Company has identified its federal income tax returns for the previous five years remain subject to examination. The Company's income tax returns in state income tax jurisdictions also remain subject to examination for the previous five years. The Company currently believes that all significant filing positions are highly certain and that all of its significant income tax filing positions and deductions would be sustained upon audit. Therefore, the Company has no significant reserves for uncertain tax positions, and no adjustments to such reserves were required by generally accepted accounting principles. No interest or penalties have been levied against the Company and none are anticipated, therefore no interest or penalty has been included in the provision for income taxes in the consolidated statements of operations.

DEEP WELL OIL & GAS INC 10-K