Microsoft owes $29 billion in back taxes plus penalties to IRS

The IRS sent a surprise bill to Microsoft, hitting the company with a $28.9 billion bill for back taxes and penalties spanning a decade, starting in 2003.

Microsoft was notified on September 26,2023 via Notices of Proposed Adjustment (NOPA) from the IRS according to an SEC filing. The issues that generated this debt pertains to intercompany transfer pricing.

Microsoft states that it disagrees with the proposed adjustments and will contest the NOPA through the IRS's administrative appeals office. If necessary, the issue will be taken to court, which seems probable at this point.

A statement embedded in the SEC filing from Daniel Goff, Corporate Vice President Worldwide Tax and Customs, shares some color on the situation. He doesn't expect the issues to be resolved anytime soon and the process could take years.

"The IRS says Microsoft owes an additional $28.9 billion in tax for 2004 to 2013, plus penalties and interest," Goff wrote. "The IRS's proposed adjustments do not represent a final determination. Not reflected in the proposed adjustments are taxes paid by Microsoft under the Tax Cuts and Jobs Act (TCJA), which could decrease the final tax owed under the audit by up to $10 billion."

Microsoft disagrees with the IRS's proposed adjustments and fines, citing that the company has always followed the rules and paid taxes owed. Microsoft says that it has paid over $67 billion in taxes to the U.S. since 2004.

Microsoft made $72.4 billion profit in its fiscal year 2023.

The IRS audit covering 2004 to 2013 has concluded, and the results do not have any bearing on present-day operations. It's not clear if operations past 2013 are being examined.

41 Comments

mayfly 1 Year · 385 comments

About 1 year ago

Well, I guess my immutable law of government still applies:

"If we see a pile of money, we're entitled to wet our beaks in it!"

I hope one day that the IRS sees fit to take action against a proven tax cheat, the don of a multigenerational organized crime family. One who has claimed to have earned billions, but paid no federal taxes in 10 out of 15 years starting in 1995. And only $750 in 2016 and 2017.

ATLMacFan1 1 Year · 2 comments

Am I supposed to know what “intercompany transfer pricing” means or how that adds up to billions of dollars?

BlueLightning 7 Years · 156 comments

Seems as if wealthy firms and individuals think white collar crime (including evading tax) is good, but they hate it when they experience blue collar crime, such as shoplifting, theft from employees, or smash and grabs. I see no difference between the two, except the former is usually MUCH larger theft. If they don't want blue collar crime, then pay the taxes and don't cheat customers.

mark fearing 16 Years · 441 comments

mayfly said:

Well, I guess my immutable law of government still applies:
"If we see a pile of money, we're entitled to wet our beaks in it!"

I hope one day that the IRS sees fit to take action against a proven tax cheat, the don of a multigenerational organized crime family. One who has claimed to have earned billions, but paid no federal taxes in 10 out of 15 years starting in 1995. And only $750 in 2016 and 2017.

There's a more reasonable assumption - that they didn't pay their taxes. I've been through this before and the soliton will be far less than what's proposed. But they likely have classification issues with write downs and property.

gatorguy 13 Years · 24627 comments

ATLMacFan1 said:

Am I supposed to know what “intercompany transfer pricing” means or how that adds up to billions of dollars?

If you do a search using the term "transfer pricing" it will bring up both the explanation of what it is, and instances where transfer pricing has attracted tax authorities and big bills.