What the IRS Is Claiming
The IRS examined your business tax returns for 2020, 2021, 2022, and 2023. They believe that Silver Star Auto did not report all of its income and claimed some business expenses that they say aren’t real.
Specifically, they are saying:
- You received more money from customers than you reported on your tax returns (they found deposits in your bank accounts that didn’t match your reported income)
- Some of the labor costs you deducted weren’t properly documented
- Some equipment and vehicle purchases they couldn’t verify
- Cash received at the shop wasn’t deposited or reported
They’re not just saying it was a mistake. They’re calling it fraud — which is their way of saying they believe it was intentional.
How Much Money Is at Stake
| What | Amount |
|---|---|
| Additional taxes they say you owe | $424,175 |
| 75% fraud penalty (on top of taxes) | $318,131 |
| Interest (grows every day) | ~$93,000 |
| Total exposure | ~$835,000 |
Civil Fraud vs. Criminal — You Are NOT Going to Jail
The IRS has two separate tracks: civil (about money) and criminal (about prison). Right now, this is only civil. That means the worst-case scenario is owing money — there is no indictment, no criminal charges, and no jail time on the table from this examination.
The word “fraud” sounds scary, but in tax law it just means the IRS thinks you intentionally underreported. The penalty for that is 75% of the tax owed — it’s a money penalty, not a criminal charge.
That said — we need to be very careful. If we handle this wrong, the civil side could get referred to the criminal division. That’s why the rules below about not talking to the IRS are absolutely critical.
What We’re Doing About It (The Defense Strategy)
- Challenge the “fraud” label. The IRS has to prove you committed fraud — and the legal standard is very high (“clear and convincing evidence”). We believe they cannot meet that standard. If fraud falls, the penalty disappears AND two of the four years (2020 and 2021) become too old for the IRS to collect on.
- Challenge how they calculated the numbers. They used your bank deposits to estimate your income. We believe they made errors — they counted non-income deposits (transfers, insurance payments, etc.) as if they were revenue.
- Prove your labor costs were real. Even if the paperwork isn’t perfect, industry data shows that an auto repair shop like yours must spend 38–45% of revenue on labor. Zero labor costs is physically impossible.
- Challenge the IRS on procedure. There are strict legal rules the IRS must follow before assessing a fraud penalty. If they didn’t follow those rules, the penalty gets thrown out automatically — we don’t even need to argue the facts.
What YOU Need to Do Right Now
- DO NOT talk to the IRS. Not the examiner, not anyone who calls claiming to be from the IRS. If contacted, say only: “I am represented by counsel. Please contact my attorney.” Then hang up.
- DO NOT sign anything from the IRS. Especially Form 870 (waives your right to go to Tax Court) or Form 872 (gives them more time to build their case).
- DO NOT destroy any documents. Keep every receipt, bank statement, invoice, email, and text message related to the business from 2020–2023. Destroying documents during an investigation creates serious legal problems.
- Get an attorney referral. You need a tax attorney who is admitted to practice before the U.S. Tax Court. We can help identify the right person — this is specialized work.
- DO NOT discuss this case with employees, friends, or family (other than your attorney). Anything you say to anyone can potentially be used by the IRS.
What Happens Next — Timeline
May 15, 2026 (already passed): The response deadline for 2020–2022 passed without a response. This does NOT mean you lose. It simply means the IRS will now issue a formal notice called a “Statutory Notice of Deficiency” (SNOD). This actually gives us the right to go to Tax Court.
June 5, 2026 (coming up): Response deadline for 2023. We need to decide whether to respond or let this one also proceed to the formal notice stage.
30–60 days from now: Expect to receive the Statutory Notice of Deficiency in the mail. This is a thick, formal letter.
90 days after the SNOD arrives: This is the most important deadline. You have exactly 90 days to file a petition with the U.S. Tax Court. If you miss this deadline, you lose your right to contest in Tax Court permanently. We will have the petition ready to file.
6–12 months after that: The case gets resolved, either through a settlement with the IRS Appeals office (most likely) or at trial in Tax Court.
The Bottom Line
This is serious but very defensible. The IRS is asking for $835K, but the most likely outcome is a negotiated settlement in the $325K–$450K range — and there is a real chance of reducing it to $150K–$220K if the fraud charge is defeated. The key is: don’t panic, don’t talk to the IRS, and let the legal team do its work.
Prepared for Salim F. Nehme and Ghassan Nehme
Reviewed by Carter Hill and Vince Caruso
Day 7 Public Benefit Corporation · May 2026