Oh kids, when will you learn that the internet is not your personal playground? There are some rules that you learn pretty early on in the game
- Words mean something. So, thoughtfulness counts.
- Naked pictures are forever.
- Your audience is not limited to your friends – anyone could be reading.
Anyone could mean the taxing authorities.
Just ask Julius Baroi and Jordan Glover. Baroi and Glover, University of Central Oklahoma students, made news as the owners of Kegheadz, a party “business” of sorts.
The folks at Kegheadz like to brag. A lot. In fact, so much that they posted – and gloated – about their business on sites like MySpace and Facebook. They made such proclamations as “Over a billion served,” and “Biggest party in the country.”
They hoped their potential customers were watching and buying the hype. But guess who else was watching? The taxman. Baroi and Glover received a $320,000 tax bill after Tax Commission auditors in Oklahoma determined that a deficiency existed through a review of the Kegheadz’ claims on their web site and information gleaned from a state Alcoholic Beverage Laws Commission raid. The bill was later reduced to $43,000.
Kegheadz, of course, swears that they never made that much; they insist that their net was less than $2,000. The problem? There are no real records since the business didn’t keep any. So does that put them in the clear? Of course not. In most audits, the burden falls largely on the taxpayer to present proof of compliance. My strong suspicion is that Oklahoma has a similar arrangement.
So now we have a case of he said, he said. Who does Administrative Law Judge Kris Kasper believe? Both sides have made arguments in the matter and must now submit briefs. After the briefs are received, Judge Kasper will make a ruling within 30 days.
There are a few lessons to be learned here, folks… Keep good records. Be careful what you post online, the internet is (nearly) forever. Know the rules (or have a good attorney or CPA that does). And use a little common sense.
Who says tax law is boring?
How many times do we have to tell people to keep records? I’m sure the party business is a cash business.
Great story and thanks for the post!
Brad Heck
Ah, I love it!
Although, I imagine if they’d actually made as much money as they claimed it would be evident in all sorts of expensive purchases… Thanks for the reminder post though!
Good story.
The best advice in the post is the last word – “And use a little common sense”. There seems to be a great lack of that commodity lately.
Pet peeve – I wish people would use the term “have a good tax professional” instead of making the assumption that only a CPA can do taxes!!! As I have said many times over the years – I have found more mistakes on 1040s prepared by CPAs than on self-prepared returns.
TWTP
Although true, proof of compliance is largely the taxpayer’s responsibility, when it comes to potential unreported income, the burden shifts to the taxing authority. I have no idea what was provided by the Oklahoma Alcoholic Beverage Laws Commission, but I assume it was convincing.
Hopefully the students have learned a lesson that will serve them in future business endeavers!
Honestly, when did kids really think things through? Like Mr. Thomas, I expect they will have learned something from this foray into business ownership and they’re lucky money is all their internet indescretion cost them.
I have a client who likes to brag about how much money he makes – and everyone that knows him knows he is lying…..I have never met anyone who pays more in bad check charges then this guy…..but it’s always a “deal” that he made 40 million on or another one that he really played the smoothie and he made 12 million – and he tells me this while I’m looking at his W-2 and interest income (2 bucks last year)and then he tells me the reason all that other money doesn’t show up is because he has a foreign corporation that hides it all for him….which I know, from knowing him for over 20 years is just another story….but I congratulate him anyway on his shrewdness……well, last year he bragged to the wrong folks and I had not one, but two IRS folks come to visit me about his returns. After I chuckled a bit about the fact that he had finally actually convinced someone that his stories were true I invited the RA’s to take a ride with me. I drove them by his home and by his work place and pointed out his car. Then I told them they probably needed to check with our local DHR folks and find out how much his family received in food stamps every month. Last weeek (perhaps the week before that) I received a call from one of the RA’s – the case is closed – the guy hasn’t got a dime hidden anywhere on this planet….in fact he probably doesn’t even have a dime – even out in the open…..folks who have anything spend most of their time bemoaning their financial status, not bragging about it…..but I kinda enjoyed the whole scenario knowing what the ultimate result would be – Oh, I called the guy to give him the news of the case being closed and he assured me he had put one over on them……so I congratulated him again about how smart he is…..and will have to call him again because he wrote me a bad check.
Skip McQuaid
Skip – that’s pretty funny! Usually, it’s the other way around. One of my clients from waaaay back showed up for our appointment in a new car that cost about $100,000, bragged about his recent trip around the world and then tried to explain that he had no income…