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.
Microsoft claims that the IRS did not account for taxes it paid under the Trump-era Tax Cuts and Jobs Act (TCJA), a legislation crafted to diminish taxes and incentivize corporations to repatriate their foreign profits at a one-time tax rate. “Microsoft disagrees with these proposed adjustments and will pursue an appeal within the IRS, a process expected to take several years,” the company stated in an SEC filing.
The IRS, having sent Notices of Proposed Adjustment to Microsoft at the end of September, has officially concluded the audit for the 2004-2013 period. However, this is likely to ignite another extended period of legal jousting as Microsoft and the federal agency spar over the actual amount to be paid. The company has expressed its intent to contest any unresolved issues through legal channels if a direct agreement with the IRS does not go ahead. Daniel Goff, Microsoft’s corporate VP for worldwide tax and customs, has stated that they are prepared to seek further legal interventions if necessary.

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