The IRS says Microsoft may owe about $29 billion in back taxes. Microsoft disagrees

SAN FRANCISCO (AP) — The Internal Revenue Service says Microsoft owes the U.S. Treasury $28.9 billion in back taxes, plus penalties and interest.

That was revealed by the company Wednesday in a securities filing.

That figure, which Microsoft disputes, stems from a long-running IRS probe into how Microsoft allocated its profits among countries and jurisdictions in the years 2004 to 2013.

Critics of that practice, known as transfer pricing, argue that companies use it to minimize their tax burden by reporting lower profits in high-tax countries and higher profits in lower-tax jurisdictions.

Microsoft said it will appeal the decision within the IRS, a process expected to take several years. The company's shares dropped slightly in aftermarket trading, falling $1.42 to $331.