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The Changing Landscape for IRS Civil Fraud Penalties

The IRS’ longstanding authority to administratively assess civil fraud penalties faces major new questions in the wake of the Supreme Court’s 2024 decision in SEC v. Jarkesy. The Court held that imposing certain types of civil penalties without a jury might violate the Seventh Amendment. This reasoning has emboldened taxpayers to challenge the IRS’ use of its in-house penalty regime, especially for the severe 75% civil fraud penalty.

Two Recent Cases, Two Opposite Outcomes

The past month alone saw two federal courts go in opposite directions on this issue:

·         In Silver Moss Properties LLC v. Commissioner (August 2025), the U.S. Tax Court rejected a post-Jarkesy constitutional challenge, upholding the IRS’ ability to assert civil fraud penalties within Tax Court refund litigation.

·         Just weeks later, in U.S. v. Sagoo (September 2025), the U.S. District Court for the Northern District of Texas ruled that the IRS’ assessment violated the taxpayer’s constitutional right to a jury trial under the Seventh Amendment—dealing a blow to the agency’s current enforcement toolbox.

Why These Cases Matter for Taxpayers

These cases significantly impact anyone facing potential IRS civil fraud penalties, which are among the harshest in the tax law arsenal, reaching 75% of the underpayment amount. The Tax Court’s position currently leaves the IRS’ administrative process intact, but the Texas District Court’s opinion could pave the way for broader constitutional challenges and, possibly, a new Supreme Court showdown.

What Taxpayers Should Do Now

Tax practitioners and high-net-worth individuals under audit should watch this evolving legal landscape closely. When facing civil fraud allegations, it may become increasingly viable, depending on jurisdiction, to assert a constitutional jury trial defense, possibly changing how these penalties are assessed and resolved going forward.

Staying informed of future appellate decisions will be crucial, as the administration of IRS civil fraud penalties could change dramatically in the coming months. If you have questions or are under IRS audit threat, seeking experienced legal counsel who monitors these developments is more important than ever.

Never Stop Arguing
Legal Basis for Abatement!

 

 

for a FREE Tax Consultation at: 

www.TaxAid.com or www.OVDPLaw.com 
or Toll Free at 888-8TaxAid (888) 882-9243

Sources:

1.       https://www.law360.com/agencies/u-s-supreme-court  

2.      https://www.law360.com/agencies/internal-revenue-service   

3.      https://www.law360.com/agencies/u-s-supreme-court  

4.      https://www.law360.com/agencies/internal-revenue-service     

5.       https://bosstaxlaw.com/understanding-the-irs-civil-fraud-penalty-what-every-taxpayer-needs-to-know/

6.      https://www.taxpayeradvocate.irs.gov/wp-content/uploads/2024/12/ARC24_MSP_09_Civ-Pen-Admin.pdf

7.       https://www.irs.gov/irm/part25/irm_25-001-006

8.      https://klasing-associates.com/tax-evasion-penalties-guide-tax-fraud-jail-time-sentences/

9.      https://taxreliefcounsel.com/blog/tax-fraud-penalties/

10.   https://www.irsstreamlinedprocedures.com/whats-the-difference-between-civil-and-criminal-tax-fraud/

11.    https://www.goldinglawyers.com/tax-fraud-penalties-irs-penalty-summary-of-tax-fraud-violations/

12.   https://www.taxpayeradvocate.irs.gov/wp-content/uploads/2020/08/Fault-Based-Civil-Tax-Penalties_ABA_SPR2019.pdf

13.   https://www.jdsupra.com/legalnews/civil-tax-fraud-should-75-percent-8377311/

14.   https://bosstaxlaw.com/understanding-the-irs-civil-fraud-penalty-what-every-taxpayer-needs-to-know/

15.    https://freemanlaw.com/irs-penalties-brief-primer/

16.   https://www.law360.com/agencies/internal-revenue-service

17.    https://www.law360.com/agencies/u-s-supreme-court

18.   https://www.taxpayeradvocate.irs.gov/wp-content/uploads/2024/12/ARC24_MSP_09_Civ-Pen-Admin.pdf

19.   https://klasing-associates.com/can-taxpayer-face-civil-fraud-penalties/

20.  https://www.communitytax.com/tax-blog/irs-tax-penalties/

21.   https://taxreliefcounsel.com/blog/tax-fraud-penalties/

22.   https://wiggamlaw.com/blog/tax-fraud-punishments/

23.   https://www.myirsteam.com/blog/understanding-tax-fraud-key-types-penalties-differences-from-tax-evasion/

24.  https://www.irs.gov/irm/part25/irm_25-001-006

25.   https://irssolution.com/blog/criminal-tax-evasion-vs-civil-tax-fraud/

Read more at: Tax Times blog

The IRS doesn’t have the same resources that it did a few years ago. Budget cuts and staff reductions have slowed things down, but slower doesn’t mean extinct. If you’re dealing with a return issue, an IRS Notice of Assessment, a Notice of Lien or Levy, or hoping to abate penalties, expect delays and don’t assume those delays work in your favor.

Many people hear about “IRS cuts” and think they’re less likely to get audited or hear from IRS Collections. That’s not how the IRS works. Reduced capacity just means longer wait times. The consequences remain the same and when the IRS finally gets to you, the amount that you owe has more than doubled, because of interest and penalties keep compounding in the interim.

Backlogs Everywhere

Everything at the IRS takes longer right now:

·         Penalty abatements can sit untouched for months.

·         Refunds are slow to issue.

·         Amended returns are even slower.

·         Correspondence audits can drag out a year or more.

·        Prepare yourself to receive multiple IRS Letter 2644C which is an interim notice informing you that the agency needs more time to process your case, often a tax return or a response to a previous notice.

That lag creates uncertainty. Whether you’re waiting on relief or trying to respond to a letter, every delay puts you at risk for growing fines, additional interest or even legal escalation if things aren’t addressed on time.

Automation 

To make up for the loss of people, the IRS increasingly relies on algorithms to flag anomalies, large deductions, missing forms, unexpected income shifts. But machines don’t understand context. A valid situation can look suspicious on paper, which means more taxpayers get flagged or audited even when they did nothing wrong. 

Why Taxpayers Feel Stuck

Getting through to the IRS is harder than ever:

·         Phone lines are jammed.

·         There is the complementary hang up after you waited on hold for an hour.

·         Letters sit unanswered.

·         In-person appointments are nearly impossible to book.

Even if you connect, it’s rarely with someone empowered to actually resolve your issue. 

For Taxpayers With Complex Tax Situations
That’s A Serious Problem!

Why a Tax Lawyer Gets Results?

Tax lawyers cut through red tape faster because they have direct access lines unavailable to the public. 

They can:

·         Push delayed abatements forward.

·         Clarify issues flagged by automation.

·         Negotiate liabilities that keep growing with interest and penalties.

·         Access your IRS Tax Transcripts to determine your IRS tax problem and how to fix it.

 Have an IRS Tax Problem?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

Read more at: Tax Times blog

President Donald Trump’s administration has just unveiled a bold new initiative poised to reshape how the United States welcomes top global talent and investment. The “gold card” program was launched on September 19, 2025, offering an unprecedented residency fast-track for wealthy foreigners who are ready to make a significant investment in America’s future.

Gone are the days of navigating complex EB-1 or EB-2 visa categories. Under the new gold card system, individuals of “exceptional value” to the U.S. can secure the right to live and work here with a $1 million investment, paving the way for a more dynamic, competitive, and innovative workforce.

These Individuals Will Pay Global Tax Just As
A U.S. Citizen Or Permanent Resident Would.

Individuals would be charged $1 million for a gold card, and $2 million for corporations sponsoring an employee, in addition to a $15,000 vetting fee. 

Commerce Secretary Howard Lutnick announced that 80,000 gold cards will be made available in the program’s first phase. The administration will carefully watch demand and performance, with the possibility of expanding the offering and integrating the model even more deeply into U.S. immigration policy.

This major policy shift is tailored for entrepreneurs, investors, and visionaries eager to make their mark and propel American prosperity forward. Whether building tech companies in Silicon Valley, launching manufacturing ventures in the Midwest, or driving biomedical breakthroughs in Florida, the gold card delivers an unmatched opportunity to join America’s story in real time.

Experts say the new framework will streamline old, cumbersome approval processes and give applicants more clarity, speed, and prestige. The Trump administration is betting that this historic change will attract the kind of talent and capital that can help propel the U.S. to global leadership for decades to come.

For international high achievers committed to innovation and investment, the American gold card is not just a visa  it’s a gateway to participate fully in a nation built on ambition and progress. Now, with a $1 million investment and their expertise, aspiring residents can step confidently onto American soil, ready to contribute at the highest level.

 Need IRS Tax Advice?

     Contact the Tax Lawyers at

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

Read more at: Tax Times blog

In a significant victory for multinational businesses, the U.S. District Court for the Western District of Michigan recently sided with pharmaceutical giant Perrigo Company in its long-running $163 million tax refund dispute with the IRS. The battle centered on the complex interplay of the economic substance doctrine and Section 482 transfer pricing regulations, providing an important precedent for cross-border tax planning.

Background: Transfers and IRS Scrutiny

Perrigo’s case involved income earned by its Israeli affiliate from sales of omeprazole between 2009 and 2012. The IRS challenged Perrigo’s transfer pricing arrangements, alleging the use of a foreign subsidiary amounted to an artificial structure designed primarily for tax avoidance. Instead of relying solely on Section 482, the well-established transfer pricing framework, the IRS pressed its case by invoking the codified economic substance doctrine, arguing that the subsidiary and related-party transactions lacked legitimate business purpose.

The Court’s Decision: Section 482 Prevails

The Michigan federal court rejected the government’s position, affirming that Perrigo’s arrangements fell squarely within the regulatory boundaries set by Section 482. 

The Court Declined To Give Precedence
To The IRS’s Economic Substance Arguments, Noting That The Detailed Transfer Pricing Rules Already
Encompass The Necessary Tests For Legitimacy, Including Whether Transactions Have Real Economic Substance.

Ultimately, the court found in favor of Perrigo, recognizing the validity of its cross-border arrangements and rendering the company entitled to much of its $163 million tax refund. The decision limits the reach of the economic substance doctrine in cases where Congress has crafted a detailed regulatory framework.

Lessons for Multinationals and Practitioners

This case highlights a crucial crossroads in international tax law. While the IRS has signaled a more aggressive strategy using the economic substance doctrine to challenge cross-border transactions, this court ruling underscores the primacy of specific transfer pricing regulations when they fully address the relevant issues. The outcome is a welcome development for businesses relying on robust documentation and arm’s-length principles in their international structures.

The ruling also sends a clear message: courts may resist broad anti-avoidance doctrines when a statutory or regulatory scheme like Section 482 already provides detailed rules and oversight. Nevertheless, taxpayers should anticipate continued IRS scrutiny of related-party transactions and be prepared to defend both the economic substance and the arm’s-length nature of their structures.

Conclusion

The Perrigo case is a bellwether for future disputes at the nexus of transfer pricing and economic substance. Multinationals can take some comfort that careful compliance with Section 482 remains a strong defense, but vigilance is still required as the IRS refines its strategies and aggressively asserts penalties in international tax cases. The evolving landscape calls for sophisticated planning and, above all, meticulous substantiation of global tax positions.

 Have an IRS Tax Problem?

     Contact the Tax Lawyers at

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

Sources:

1.       https://www.law360.com/articles/2392644/perrigo-mostly-beats-us-in-163m-tax-refund-dispute   

2.      https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID3901985_code384494.pdf?abstractid=3901985&mirid=1&type=2

3.      https://www.law360.com/tax-authority/international/articles/2392644/perrigo-mostly-beats-us-in-163m-tax-refund-dispute 

4.      https://www.grayreed.com/portalresource/TopFederalCases2024  

5.       https://www.forbes.com/sites/taxnotes/2024/04/01/will-the-economic-substance-doctrine-and-its-potential-tax-consequences-swallow-transfer-pricing/      

6.      https://insightplus.bakermckenzie.com/bm/dispute-resolution/united-states-irs-signals-increased-assertion-of-the-economic-substance-doctrine-and-related-penalties-in-transfer-pricing-cases

7.       https://www.caplindrysdale.com/news-clark-armitage-weighs-in-on-transfer-pricing-in-2025-in-tax-notes 

8.      https://www.pacermonitor.com/public/filings/DXIJBTHA/Perrigo_Company_v_United_States_of_America__miwdce-17-00737__0395.0.pdf

9.      https://www.cadwalader.com/resources/patent-litigation-tracker/trial-page-2

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21.   https://www.law360.com/articles/2392644/perrigo-mostly-beats-us-in-163m-tax-refund-dispute

22.   https://www.caplindrysdale.com/news-clark-armitage-weighs-in-on-transfer-pricing-in-2025-in-tax-notes

23.   https://www.forbes.com/sites/taxnotes/2024/04/01/will-the-economic-substance-doctrine-and-its-potential-tax-consequences-swallow-transfer-pricing/

24.  https://insightplus.bakermckenzie.com/bm/dispute-resolution/united-states-irs-signals-increased-assertion-of-the-economic-substance-doctrine-and-related-penalties-in-transfer-pricing-cases

25.   https://law.justia.com/cases/federal/appellate-courts/ca3/24-2861/24-2861-2025-08-12.html

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27.   https://www.law360.com/articles/2392644/perrigo-mostly-beats-us-in-163m-tax-refund-dispute  

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29.  https://www.forbes.com/sites/taxnotes/2024/04/01/will-the-economic-substance-doctrine-and-its-potential-tax-consequences-swallow-transfer-pricing/  

30.  https://www.caplindrysdale.com/news-clark-armitage-weighs-in-on-transfer-pricing-in-2025-in-tax-notes 

31.   https://www.vitallaw.com/news/us-irs-drops-transfer-pricing-case-against-pharma-giant-perrigo/gdn01163640

32.   https://www.nytimes.com/2022/07/07/business/perrigo-omeprazole-taxes-ey.html

33.   https://investor.perrigo.com/2021-09-29-Perrigo-Resolves-Irish-Tax-Assessment-for-EUR297-million

34.   https://www.reuters.com/legal/government/us-judge-rules-against-perrigo-over-19-billion-irish-tax-liability-2021-07-16/

35.   https://www.law360.com/tax-authority/international/articles/2392644/perrigo-mostly-beats-us-in-163m-tax-refund-dispute

36.   https://www.ai-cio.com/news/florida-pensions-agree-to-settle-perrigo-lawsuit-for-31-9-million/

37.   https://www.algoodbody.com/insights-publications/news/settlement-of-irish-revenues-largest-tax-assessment

38.  https://www.vitallaw.com/news/us-irs-drops-transfer-pricing-case-against-pharma-giant-perrigo/gdn01163640

39.   https://www.irishtimes.com/business/health-pharma/perrigo-agrees-300m-settlement-of-1-64bn-tax-assessment-1.4687034

40.  https://investor.perrigo.com/2022-08-17-PERRIGO-RELEASES-STATEMENT-ON-RECENT-MARKET-TRADING-ACTIVITY

Read more at: Tax Times blog