Cover Letter — Letter 5153 (Tax Years 2020–2022)
From: Stacie Schleicher, Supervisory Revenue Agent
To: Salim’s Silver Star Auto, 1034 S. Tejon, Colorado Springs CO 80903
Date: May 5, 2026
Tax Periods: December 31, 2020 · December 31, 2021 · December 31, 2022
Examiner: Keri Frisbie · ID 1004283631 · 719-551-4936
Response Due: May 15, 2026
Letter 5153 enclosed two copies of an examination report proposing changes. It warned that failure to respond by May 15, 2026 would result in processing the case on the proposed changes and issuing a Statutory Notice of Deficiency (90-day letter).
Cover Letter — Letter 950 (Tax Year 2023)
From: Keri Frisbie, Revenue Agent
Date: May 5, 2026
Tax Period: December 31, 2023
Response Due: June 5, 2026
This second letter covers 2023 separately. Same format, same examiner, but with a later response deadline of June 5, 2026.
Form 4549-A — Examination Changes (2020–2022)
Adjustments to Income & Deductions
| Adjustment | 2020 | 2021 | 2022 |
|---|---|---|---|
| Cost of Labor (disallowed) | $181,285 | $81,162 | $11,544 |
| Depreciation (disallowed) | — | — | — |
| Other Deductions – Insurance | $364,224 | $78,405 | — |
| Other Deductions – Lease Expense | $141,854 | $114,000 | $77,762 |
| Other Deductions – Auto | $5,494 | — | — |
| Employee Benefit Programs | $7,918 | $3,069 | — |
| Rents | $10,168 | $535 | $689 |
| Gross Receipts (unreported) | $745,314 | $164,188 | $47,743 |
| Total Adjustments | $478,392 | $142,497 | $512,849 |
Tax Computation (2020–2022)
| Line Item | 2020 | 2021 | 2022 |
|---|---|---|---|
| Corrected Taxable Income | $617,800 | $127,531 | $745,331 |
| Corrected Tax Liability | $120,307 | $156,520 | $176,536 |
| Tax Shown on Return | $21,524 | $26,782 | $58,824 |
| Deficiency | $98,783 | $129,738 | $117,712 |
Form 4549-A — Examination Changes (2023)
| Adjustment | 2023 |
|---|---|
| Cost of Labor (disallowed) | $234,010 |
| Other Deductions – Auto | $5,183 |
| Employee Benefit Programs | $5,541 |
| Gross Receipts (unreported) | $126,217 |
| Total Adjustments | $371,151 |
| Corrected Taxable Income | $563,710 |
| Corrected Tax Liability | $118,379 |
| Tax Shown on Return | $40,437 |
| Deficiency | $77,942 |
Fraud Penalty Assertions — IRC §6663
The IRS asserts that the entire underpayment for each year is attributable to fraud.
| Tax Year | Tax Deficiency | §6663 Penalty (75%) | Total Tax + Penalty |
|---|---|---|---|
| 2020 | $98,783 | $74,087 | $172,870 |
| 2021 | $129,738 | $97,304 | $227,042 |
| 2022 | $117,712 | $88,284 | $205,996 |
| 2023 | $77,942 | $58,457 | $136,399 |
| TOTAL | $424,175 | $318,131 | $742,306 |
Interest Computations — IRC §6601
Interest is computed from the due date of each return (including extensions) to June 4, 2026 at compound rates ranging from 4% to 8% over the period.
| Tax Year | Extension Date | Interest Computed To | Estimated Interest |
|---|---|---|---|
| 2020 | April 18, 2021 | June 4, 2026 | ~$28,626 |
| 2021 | April 18, 2022 | June 4, 2026 | $32,212 |
| 2022 | April 18, 2023 | June 4, 2026 | $22,800 |
| 2023 | April 15, 2024 | June 4, 2026 | $9,784 |
| TOTAL INTEREST | ~$93,422 | ||
Summary of Amounts Due Per IRS
| Year | Tax | Penalties | Interest | Total |
|---|---|---|---|---|
| 2020 | $98,783 | $74,087 | ~$28,626 | ~$201,496 |
| 2021 | $129,738 | $97,304 | $32,212 | $259,254 |
| 2022 | $117,712 | $88,284 | $22,800 | $228,796 |
| 2023 | $77,942 | $58,457 | $9,784 | $146,183 |
| TOTAL | $424,175 | $318,131 | ~$93,422 | ~$835,728 |
Fraud Lead Sheet Findings (507-01)
The examiner (Keri Frisbie) prepared a Civil Fraud Penalty Lead Sheet dated January 27, 2026. Key findings asserted by the IRS:
Badges of Fraud Cited by Examiner
| # | Badge | Examiner’s Assertion |
|---|---|---|
| 1 | Understatement of income | Income understated every year; bank analysis shows higher gross receipts than reported |
| 2 | Inadequate records | Cash not deposited; RO Writer records not reconciled to tax returns; invoices left open |
| 3 | Implausible explanations | Gus changed explanations about vehicle sales across interviews; asset purchases unverifiable |
| 4 | Concealment of income | Cash kept at shop, not deposited; only $1,500/month “agreed” with CPA reported |
| 5 | Dealing in cash | Cash payments to workers; cash from customers not deposited |
| 6 | Pattern of conduct | Consistent across all four years; “creative accounting” using Sales Other as “plug figure” |
| 7 | Filing false documents | Tax returns reflect understated income; depreciation for unverifiable assets |
Key Facts from the Lead Sheet
- Owner (Salim) and wife help with customer service at their leisure; Gus runs day-to-day operations
- Gus works full-time at Silver Star AND full-time at his restaurant (Marigold’s Café and Bakery)
- Cash received is NOT deposited — kept for Gus to use for purchases/expenses
- Owner and CPA agreed on $1,500/month to include on the books as cash income
- Gus admitted to buying/selling vehicles but only when presented with proof (dealer license, auction records)
- Asset purchases on depreciation schedule resulted from discussions between owner and CPA without documentation
- Insurance expenses could not be verified despite multiple IDR requests
- Storage containers ($120K claimed) were never received and never paid for
- Vehicle purchases include invoices that “appear fictitious and could not be verified”
Understated Income by Year (per IRS bank analysis)
| Year | Reported Gross Receipts | IRS Bank Analysis | Understatement |
|---|---|---|---|
| 2020 | ~$1,019,000 | ~$1,764,000 | ~$745,000 |
| 2021 | ~$1,614,000 | ~$1,778,000 | ~$164,000 |
| 2022 | ~$1,741,000 | ~$1,788,000 | ~$48,000 |
| 2023 | ~$1,424,000 | ~$1,550,000 | ~$126,000 |
Source: IRS Examination Package dated May 5, 2026 (Letter 5153, Form 4549-A, Form 870, Interest Computations, Civil Fraud Lead Sheet 507-01). Numbers extracted from OCR of original documents; minor rounding may exist.
Reviewed by Carter Hill and Vince Caruso · Day 7 Public Benefit Corporation · May 2026