The corporation must pay penalties and interest. Microsoft will appeal the IRS ruling if necessary. If the IRS wins, Microsoft could owe $29 billion to the US.
$29 Billion for Back Taxes of Microsoft
After an IRS audit, the software giant disclosed it owes $28.9 billion in back taxes on Tuesday. The federal government investigated Microsoft’s accounts from 2003 to 2014 and found that it owes the astonishing figure plus penalties and interest. “The main disagreement is the way Microsoft allocated profits during this period among countries and jurisdictions,” Microsoft said. The subsidiaries were entitled to profits because they shared in the costs of producing certain intellectual property under IRS cost-sharing requirements.
Microsoft allegedly underreported its US income for a decade, prompting IRS prosecution for back taxes. The government mailed Redmond “Notices of Proposed Adjustments” regarding the debt on Sept. 26. Microsoft is fortunate that the IRS’ verdict isn’t final. The company plans to fight the tax issue through the agency’s “administrative appeals office and, if necessary, judicial proceedings.”
Microsoft can escape short-term financial losses because the appeals process could take years. The 2018 Tax Cuts and Jobs Act could cut the final tax bill by $10 billion, Redmond says. “As of September 30, 2023, we believe our income tax contingency allowances are adequate,” Microsoft said in a stock exchange report.