Microsoft plans to contest a US Internal Revenue Service request for an additional $28.9 billion in back taxes for the years 2004 to 2013, the company said in a securities filing Wednesday.
The demand is the result of a yearslong audit by the IRS into Microsoft’s past accounting practices. In particular, the agency took issue with how the company “allocated profits … among countries and jurisdictions,” Microsoft said in the filing.
“The IRS says Microsoft owes an additional $28.9 billion in tax for 2004 to 2013, plus penalties and interest,” the company said. It noted that the IRS’s determination is not final and does not include up to $10 billion in taxes Microsoft paid under the 2017 Tax Cuts and Jobs Act that could reduce its final bill.
The company said it plans to appeal the IRS request, a process that will likely take several years.
“We believe we have always followed the IRS’s rules and paid the taxes we owe in the U.S. and around the world,” the company said in the filing. “Since 2004, we have paid over $67 billion in taxes to the U.S.”
Microsoft noted that as it prepares to work through the IRS Appeals Process — and, potentially, the courts — the company believes its current “allowances for income tax contingencies are adequate.”
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