IRS Says Microsoft Owes $28.9 Billion in Back Taxes After Audit Dispute

Microsoft is grappling with a colossal tax bill, amounting to $28.9 billion, stemming from historical accounting practices scrutinized by the IRS. A contentious audit of almost two decades of Microsoft’s tax payments focused on its accounting trick of offshoring profits to Puerto Rico.

TechCrunch reports that Microsoft, the technology giant with a market capitalization soaring to $2.5 trillion, faces a massive tax bill after an audit spanning almost two decades. The IRS audit, spanning from 2004 to 2013, has determined that Microsoft owes $28.9 billion in back taxes, a figure that is inclusive of penalties and interest. This is part of a trend where the IRS has progressively become more stringent with large corporations, especially those redirecting profits to overseas tax havens.

Microsoft’s tax strategy involved moving “at least” $39 billion in profits to Puerto Rico. This was orchestrated through a scheme that saw its intellectual property (IP) being transferred to a small factory it owned on the Caribbean island. The IRS’s pursuit of Microsoft over this practice has spanned years of legal and political wrangling.

Microsoft encountered a legal setback in January, where it lost a lawsuit that sought to compel the IRS to unveil thousands of audit-related records. The company, however, remains steadfast in its stance, asserting that the IRS’s proposed figure should be reduced by as much as $10 billion.