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January 28, 2023

Your Naughty Tax Preparer of the Day

Like father, like son.

On Nov. 5, 2013, Cleo Reed was sentenced to 30 months in federal prison by the U.S. Attorney’s Office in the Western District of Washington for filing more than 1,300 fraudulent tax returns between October 2007 and July 2010, resulting in a tax loss of $4.2 million. Authorities said Reed inflated the wages his low-income clients allegedly earned so they could maximize their refund under the Earned Income Tax Credit. When a client’s tax refund was approved by the IRS, Reed pocketed a portion of the refund as his fee.

Nearly eight years later, Cleo Reed Jr. is following in Dad’s footsteps, as he pleaded guilty on Feb. 1 to aiding in preparation and presentation of false tax returns.

According to the U.S. Attorney Office in the Western District of Washington, Junior implemented the same fraudulent technique used by his father’s tax preparation business:

Reed, Jr., created “Just Us Tax Services” and later merged it with “Young’s Tax Services.” The companies filed tax returns fraudulently claiming inflated amounts of Earned Income Tax Credits (EITC) in order to increase clients’ tax refunds and therefore the fee they would receive for tax preparation. Reed, Jr., admits operating the tax fraud scheme even after his father was sentenced to prison for the same conduct.

According to records filed in the case, in 2011 and 2012, even as Reed Jr.’s father’s tax preparation business was under investigation for preparing fraudulent returns, Reed, Jr., opened and operated “Just Us Tax Service” so that his father could continue filing tax returns on behalf of clients, by filing them in the name of a tax preparation firm that was different than the name of the tax preparation firm the IRS was investigating. After opening Just Us Tax Services to assist his father, Reed, Jr., also started filing fraudulent tax returns on behalf of some clients, however. In doing so, he used the same fraudulent technique utilized by his father’s tax preparation business.

When the IRS terminated Reed, Jr.’s tax preparation registration, he had an acquaintance open and register “Young’s Tax Service” in 2014 and continued filing tax returns with fraudulent entries for Earned Income Tax Credit. Reed, Jr., filed the false returns from his home and from Everyday Essentials, the marijuana dispensary he owned and operated in Puyallup.

The total amount of tax loss to which Reed, Jr., is admitting criminal liability is $39,899. Reed, Jr., has agreed to make restitution to the IRS in that same amount. The IRS may still assess interest and civil tax penalties.

Junior will find out on May 10 if he’ll get a more harsh or a more lenient jail sentence than his Pops.

[Justice Department]

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