LOS ANGELES – A Riverside County tax preparer was sentenced today to 41 months in federal prison for defrauding the IRS out of more than $2.1 million by submitting phony tax returns, including ones that maximized fraudulent refunds through child tax credits and bogus businesses for hundreds of his clients.
Dennis L. Reed II, 31, of Hemet, was sentenced by United States District Judge Otis D. Wright II, who also ordered Reed to pay $2,158,337 in restitution to the IRS. Reed pleaded guilty on September 3 to two counts of aiding and assisting in the preparation of false income tax returns.
Between 2014 and 2019, Reed prepared hundreds of federal and state income tax returns containing false claims designed to generate or increase fraudulent tax refunds. For example, the fraudulent tax returns falsely claimed that the taxpayers had dependents, operated a sole proprietorship, or were entitled to receive credits for certain educational expenses.
As part of the tax fraud, Reed 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. Reed created false Schedule C businesses such as hairstylist or barber for these clients. 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.
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 were not 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.” 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.
“The victim of [Reed’s] offense is not simply a faceless bureaucracy, but all the honest and hardworking American citizens and residents who go to work each day and pay their fair share of taxes as the law requires of them,” prosecutors wrote in their sentencing memorandum.
IRS-Criminal Investigation investigated this matter.
This case was prosecuted by Assistant United States Attorney Valerie L. Makarewicz of the Major Frauds Section.
Release No. 19-248