Microsoft to Appeal IRS’s $29B Back Taxes Claim

The United States Internal Revenue Service (IRS) has informed Microsoft Corp (NASDAQ: MSFT) that it owes back taxes of  $28.9 billion “plus penalties and interest” for the tax years 2004 through 2013. In an 8-K filing on Wednesday, the corporation revealed that it had received Notices of Proposed Adjustment (NOPAs) from the IRS.

Microsoft counters that up to $10 billion in taxes that it has already “under the Tax Cuts and Jobs Act (TCJA), which could decrease the final tax owed under the audit by up to $10 billion” are not reflected in the proposed adjustments.

Further, the tech giant’s Corporate Vice President for Worldwide Tax and Customs Daniel Goff wrote in a blog post on Wednesday that Microsoft has changed its corporate structure practices since the period covered by the audit. He stated that the issues “raised by the IRS are relevant to the past but not to our current practices.” Microsoft plans to raise its issues with IRS Appeals, a separate IRS division that deals with tax disputes.

“Microsoft disagrees with these proposed adjustments and will pursue an appeal within the IRS, a process expected to take several years. We believe we have always followed the IRS’ rules and paid the taxes we owe in the US and around the world. Microsoft historically has been one of the top US corporate income taxpayers. Since 2004, we have paid over $67 billion in taxes to the US,” Goff wrote.

If the appeal process, which could take years, does not result in a unanimous agreement, the corporation would have to settle any unresolved issues in court. Goff added that Microsoft will continue to cooperate with the IRS and work towards a mutual resolution.

“We will also continue to share updates on significant developments through our public quarterly and annual reports and financial statements, as we have through this entire process. As of September 30, 2023, we believe our allowances for income tax contingencies are adequate,” he stated.