A Tax Fraud Who Cheated IRS of $4M for Poor Clients

Last updated on October 21, 2022

Cleo Reed was a tax preparer who prepared false tax returns for people who had no income. He was caught and awaits sentencing, but he is not sorry. He believes he did a service to the unprivileged. Seattlepi shares the particulars of the story:

“While prosecutors describe him as an admitted fraud caught on tape saying he likes ‘f—ing with the government,’ Reed would cast himself as a man who answered a ‘spiritual calling’ to help ‘[the] underemployed, disabled, and veterans of this great land’ by cheating tax collectors.

Mr. Reed elaborates in a letter to the court, “As I see it, these are real people, doing real work and they should be entitled to the same rights and privileges as every other working American.”  He goes on to say that “being the humanitarian that I am, I felt it was my constitutional responsibility to inform the poor and underemployed of their patriotic obligation to report all earned income to the U.S. government.”

Reed owns and operates the We B Tax Services and is scheduled to be sentenced Friday in U.S. District Court in Washington State, gives himself credit “for helping others pay their child support and debts, and for stimulating the economy.”

The refund money he stole from the IRS was taxpayer money received by the government in tax payments to the IRS. In that light, his actions do not seem as spiritual or moral. He was caught in a sting in 2010 after the IRS discovered that he was filing very large numbers of tax returns that had claims for payment under a tax credit targeted at low-wage workers with children. Seattlepi tells of how he got  tax refunds for people with no income:

“. . . Reed was inflating the incomes of his clients – generally unemployed women with children – so that they could claim an earned income tax credit. The credit is available to low- and middle-income families and allows for cash payment if the amount of the credit exceeds the taxes due, as is often the case for recipients with very low incomes.”

Seattlepi explains further: “In 2012, a married couple with one child earning less than $36,920 annually could claim a $3,169 tax credit. To do so, though, the recipient must have collected a paycheck or made money through self-employment; public benefits, child support and investment earnings don’t qualify as earned income.

“Reed admitted to faking income claims for his clients, who would not otherwise be able to claim the tax credit because they earned no pay. Doing so, he ensured they received thousands of dollars in taxpayer money they weren’t due.”

Reed is not currently in prison and awaits sentencing. He procured money for people in need, but one thing is sure, he did not cheat the government out of money, he cheated American taxpayers out of money. However, the judgment must rest with the court.