5. Accrued Payroll Taxes

6 Months Ended

Dec. 31, 2020

Payables and Accruals [Abstract]

Accrued Payroll Taxes

5. Accrued Payroll Taxes

As of December 31, 2020, and June 30, 2020, the Company had $10,756,448 and $10,519,440, respectively, of accrued payroll taxes, penalties and interest relating to calendar years 2004 - 2007. The total balance for accrued payroll taxes has accumulated on a quarterly basis beginning on their respective quarterly filing dates. Accrued interest is compounded daily at an estimated effective interest rate of 7.33%. The quarterly sub-totals that make up the $10,756,448 balance have a calculated expiration date of 10 years according to the Internal Revenue Service statute of limitations. As the tax periods surpass their estimated expiration date, the Company removes the liability from the condensed consolidated balance sheets, and an equivalent amount is recognized as “Gain on expiration of accrued payroll taxes” within other income on the condensed consolidated statements of operations. For the six months ended December 31, 2020 and 2019, the Company recognized $237,007 and $392,325, respectively, of penalties and interest within interest expense on the condensed consolidated statements of operations. For the six months ended December 31, 2020 and 2019, the Company recognized $0 and $1,276,837, respectively, within “Gain on expiration of accrued payroll taxes” as a result of quarterly tax liabilities that expired during the fiscal periods. The amount owing may be subject to additional late filing fees and penalties that are not quantifiable as of the date of these condensed consolidated financial statements. In addition, the Company periodically reviews the historical filings in determining if the statute has been paused or extended by the Internal Revenue Service.