Riverside County Tax Preparer Pleads Guilty to Charges of Cheating IRS Out of $2.1 Million through Filing of Hundreds of Bogus Returns

          LOS ANGELES – An Inland Empire income tax return preparer pleaded guilty today to federal criminal charges for defrauding the Internal Revenue Service out of more than $2.1 million by submitting false tax returns on his clients’ behalf, including obtaining child tax credits for childless clients.

          Dennis L. Reed II, 31, of Hemet, pleaded guilty to two counts of aiding and assisting in the preparation of false income tax returns. United States District Judge Otis D. Wright II scheduled a December 2 sentencing hearing, at which time Reed will face a statutory maximum sentence of six years in federal prison.

          Reed admitted in his plea agreement that, from 2014 through 2019, he prepared hundreds of federal and state income tax returns containing false claims designed to generate or increase fraudulent tax refunds. The fraudulent tax returns falsely claimed, for example, that the taxpayers had dependents, operated a sole proprietorship, or were entitled to receive credits for certain educational expenses.

          For example, Reed admitted he prepared at least 384 returns that falsely stated that the client had earned income from Schedule C sole proprietorships, which are tax forms used by the self-employed to report business profits or losses. In reality, Reed knew his clients did not work at all during the year, had not earned income, and were not required to file an income tax return, the plea agreement states. On at least 79 tax returns, Reed admitted he created phantom business income or losses and claimed false dependents on clients’ tax returns in order to generate tax refunds to which the clients weren’t entitled. On at least 114 tax returns, Reed falsely claimed that the clients had educational expenses that resulted in refunds to which they weren’t entitled.

          Though Reed prepared federal income tax returns for clients, he did not sign their returns to identify himself to the IRS as the returns’ preparer, but rather stated on the tax returns that they were “self-prepared,” the plea agreement states. Reed admitted that he charged clients between $350 and $1,350 to prepare and file income tax returns.

          The false tax returns Reed prepared resulted in a loss of $2,158,337 to the IRS, according to the plea agreement.

          This matter was investigated by IRS Criminal Investigation.

          This case is being prosecuted by Assistant United States Attorney Valerie L. Makarewicz of the Major Frauds Section.