Jackson's executors said the late musician's net worth at the time of his death in 2009 was slightly more than $7 million, the Los Angeles Times reported Friday.
The IRS said his net worth was closer to $1.125 billion.
The discrepancy was so wide, the IRS said, it qualified for a gross valuation misstatement penalty, allowing the government to double the 20 percent penalty for underpayment.
"I've never even heard of the gross valuation misstatement penalty being asserted," said Andrew Katzenstein, an estate tax expert at the law firm Proskauer Rose in Los Angeles.
Celebrity Couples of 2014 [PHOTOS]