Inglewood-based Tax Preparer Indicted in $5 Million Tax Fraud Case
LOS ANGELES – A tax preparer and former California Franchise Tax Board employee was arrested today on a 26-count federal grand jury indictment alleging he schemed to defraud the Internal Revenue Service by declaring fictitious withholdings used to fraudulently claim tax refunds of more than $5 million.
Cubby Wayne Williams, 63, of Alhambra, was arraigned this afternoon in United States District Court on 22 counts of assisting in the preparation of false tax returns for his clients and four counts of subscribing to false tax returns for himself. United States District Judge Percy Anderson has scheduled a May 13 trial-setting hearing for Williams, who is free on $20,000 bond.
According to the indictment, Williams owns and operates Williams Financial Network, an Inglewood-based tax services company. Prior to forming this company, Williams worked from 1985 to 1996 as a compliance representative in the California Franchise Tax Board’s collection division.
Williams allegedly filed tax returns claiming that his clients had accrued Original Issue Discount (OID) interest income. OID is a form of interest that accrues over the life of a bond or other debt instrument, but is not payable as it accrues. Financial institutions use IRS Forms 1099-OID to report this accrued, but unpaid, income, and any tax withholdings on it.
Williams filed approximately 514 tax returns for clients for tax years 2010 through 2016, fraudulently claiming OID withholdings and seeking approximately $5.49 million in bogus tax refunds, according to prosecutors, who also stated that the IRS paid out approximately $3 million on these fraudulent claims. The clients have not been charged in the alleged scheme.
Williams admitted creating the Forms 1099-OID he gave to IRS auditors, who questioned the withholdings he claimed on the tax returns he prepared for his clients and himself, prosecutors said in court today.
If convicted of all counts, Williams would face a statutory maximum sentence of 78 years in federal prison.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.
This case is being investigated by IRS Criminal Investigation.
This matter is being prosecuted by Assistant United States Attorney Ranee Katzenstein of the Major Frauds Section.