Microsoft to Appeal IRS Determination of $28 Billion in Back Taxes

( — Tech industry giant Microsoft revealed in a federal filing this week that it plans to contest a request from the Internal Revenue Service for an additional $28.9 billion in back taxes, plus interest and penalties for the years 2004 through 2013, CNN reported.

In a filing to the Securities and Exchange Commission on Wednesday, the tech giant said the IRS informed Microsoft that it owes back taxes plus interest and penalties and noted that the IRS’s determination is not final and failed to include as much as $10 billion in taxes that the company paid under the Tax Cuts and Jobs Act of 2017 that would reduce the final bill.

The IRS’s demand was the result of a yearslong audit into the company’s past accounting practices, particularly related to Microsoft’s practice of transfer pricing, specifically allocating its profits among different countries and tax jurisdictions to reduce its tax liability.

According to the Associated Press, critics of transfer pricing argue that it is a practice that international companies often employ to minimize their tax burden by reporting higher profits in low-tax countries or jurisdictions and lower profits in high-tax countries or jurisdictions.

Microsoft informed the SEC that it plans to appeal the decision, a process that could take several years.

The company said in its filing that it has “always followed the IRS’s rules” and paid all of its taxes both in the United States and “around the world.” Microsoft noted that since 2004, the company has paid more than $67 billion in taxes to the US Treasury.

Microsoft said that while it works through the IRS’s appeals process and any possible court battles, it believes that its current “allowances for income tax contingencies are adequate.”

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