Microsoft discloses IRS says the tech giant owes nearly $29 billion in unpaid taxes

Microsoft just disclosed the Internal Revenue Service (IRS) has asked for a hefty sum of taxes that it believes the tech company has not paid. 

The funds, sought through notices of proposed adjustments, totalled $28.9 billion not including penalties and interest, according to a Securities and Exchange Commission (SEC) filing submitted Wednesday by Microsoft. The IRS apparently believes the company owes that amount for tax years 2004 to 2013.

Microsoft said the IRS sent the notices late last month. 

“We disagree with the proposed adjustments and will vigorously contest the NOPAs through the IRS’s administrative appeals office and, if necessary, judicial proceedings,” the tech company said.

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Microsoft, while disclosing the situation to the SEC, attached a blog post to its filing. 

In it, the company explained the “main disagreement” as being over how it “allocated profits during this time period among countries and jurisdictions.” Microsoft “acted in accordance with IRS rules and regulations,” it argued. 

Microsoft also said that the IRS did not take up to $10 billion worth of tax payments made under the Tax Cuts and Jobs Act into account. That legislation became law in late December 2017.

The company has paid over $67 billion worth of taxes to the U.S. government in the years since 2004, it said in the SEC filing. 

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For income tax contingencies, Microsoft reported having “adequate” allowances. It also told investors that it did “not anticipate a significant increase or decrease to our tax contingencies for these issues within the next 12 months,” according to the filing. 

The situation will likely not see resolution any time in the near future. The company estimated that appealing through the IRS could last “several” years.

The disclosure of the IRS notices comes just under two weeks before Microsoft plans to announce its financial results for fiscal 2024’s first quarter.

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Over the course of its 2023 fiscal year, Microsoft produced $211.9 billion in revenue, up roughly 6.9% compared to the $198.3 billion it generated in the prior year. Its annual net income, meanwhile, experienced a 0.5% decline, hitting $72.36 billion.