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Local Law Firms Home > Taxation Law News > Rihanna Raps Accountants for Taxation Law Violations If you earn $53 million in a calendar year and still end up with an on-paper loss, that's a bit of a stretch of taxation law and an open invitation for an IRS audit. This is exactly what happened to Rihanna and she is now mad at her accountants. The singer has shown her displeasure at the turn of events by filing a lawsuit against her accountants. Michael Mitnick and Peter Gounis. and the New York-based accounting firm Berdon LLP. Rihanna, whose "Last Girl on Earth" tour was a critical hit and sold a lot of tickets, said the on-paper loss was because of her accountants' exploitative and exorbitant practice of taking a 25 percent cut of her sales in return for their services. That, and the lack of documentation, resulted in an IRS audit. The cost of the resulting tax bill and the legal expense of defending against the audit were apparently so huge that it wiped out the singer's annual profit. The audit is still ongoing, and now Rihanna wants her accountants to take the rap for it. The lawsuit was filed in federal court in Manhattan with the plaintiff as Robyn Fenty, which is Rihanna's real name. The lawsuit blames the defendants for shoddy bookkeeping, the IRS audit and for failing to recommend that their client should not have purchased a $6.9 million home while her 2009 tour was losing money. Rihanna has since sued the real estate developer of the home, claiming it had structural defects. The lawsuit also claims that her accountants' practice of taking commissions on revenues created a conflict of interest. She says they were hired when she arrived from Barbados in 2005 as a 16-year old. The lawsuit accuses the accountants for breach of agreement, misconduct and malfeasance. The accountants apparently created entities to manage her finances without regard to the tax impact, and made it worse by not keeping any revenue or expense documentation. Rihanna fired them in Sept 2010 and her next "Loud" tour in 2011 brought in a net profit equal to 40 percent of total revenues.
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