Tacoma tax preparer pleads guilty to tax fraud scheme


Date: February 1, 2021

Contact: newsroom@ci.irs.gov

Tacoma, Washington — A Lakewood, Washington, man pleaded guilty today in U.S. District Court in Tacoma to aiding in preparation and presentation of false tax returns for his multi-year fraudulent tax preparation scheme. Cleo 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. Cleo J. Reed, Jr., admits operating the tax fraud scheme even after his father was sentenced to prison for the same conduct. Sentencing is scheduled for May 10, 2021 in front of U.S. District Judge Benjamin H. Settle.

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.

On October 31, 2013, the United States District Court Judge Benjamin H. Settle sentenced Reed, Jr.'s father, Cleo Reed, Sr., to a term of 30 months' imprisonment for his role in the scheme. While he waited to report to prison, Reed, Sr., told former clients that he was turning the tax preparation business over to his son as a result of both the criminal investigation of Reed, Sr., and his failing health.

Aiding in preparation and presentation of false tax returns is punishable by up to three years in prison.

The case is being investigated by the Internal Revenue Service Criminal Investigation (IRS-CI). The case is being prosecuted by Assistant United States Attorney Arlen Storm.