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Microsoft Warns of Financial Dent as IRS Reviews Tax Records

Software giant Microsoft has warned that the on-going review of its US tax obligations by the IRS will have a negative impact on its financial statement if the ball doesn’t swing in its favour.

The Internal Revenue Service is currently looking into some of the tax saving methods used by Microsoft in order to avoid paying the hefty 35% on profit tax levied in the United States.

Big companies have adopted the practice of booking their profits oversees, jurisdictions where there is lower tax.

According to Reuters, Microsoft said in a recent filing that the IRS had released a Revenue Agent's Report after scanning the 2004-2006 tax years but Microsoft had appealed against some of the findings in the report.

The company was not specific about what was in the report but said that 2007-2010 tax years were now being scrutinised by the IRS.

“We do not agree with the adjustments in the RAR, and we have filed a protest to initiate the administrative appeals process," Microsoft said in the filing.

"The proposed adjustments are primarily related to transfer pricing and could have a significant impact on our financial statements if not resolved favourably,” it added.