The IRS just hit Microsoft with a massive tax bill – here’s why
A new Securities and Exchange Commission (SEC) filing has uncovered a multi-billion dollar tax bill that landed on Microsoft’s desk on September 26, 2023.
According to the 8-K archivingThe Internal Revenue Service (IRS) is seeking $28.9 billion in “additional tax payments,” plus penalties and interest, for the tax years from 2004 to 2013.
The bill, or more officially: Notices of Proposed Adjustment, concerns ‘intercompany transfer pricing’, according to Microsoft, which also wants to emphasize that the audit covers previous years and that business practices have changed since then.
Microsoft owes more than $29 billion in taxes
In response to the eye-popping bill, Redmond said, “We disagree with the proposed changes and will vigorously challenge the NOPAs through the IRS Administrative Appeals Bureau and, if necessary, through legal proceedings.”
The company also emphasizes that it is working with the IRS to answer questions about the allocation of revenues and expenses for tax years dating back to 2004.
Microsoft said the taxes it has already paid under the Tax Cuts and Jobs Act (TCJA) could reduce its bill by about $10 billion, essentially losing a third.
The IRS bill is best seen as a stark warning, as the audit has yet to be completed. Even then, a dispute between Microsoft and the U.S. federal tax authorities could drag on for several years until the two reach a mutual agreement. This is because in Microsoft’s eyes it has acted in accordance with the IRS rules and regulations, which adds an extra layer to the process.
In the meantime, Microsoft promises to keep us informed through its public quarterly and annual reports and financial statements.
For now, however, this is just one of many complaints filed against the company, with several antitrust lawsuits taking place or continuing to take place around the world.