The IRS has stated Microsoft (MSFT) owes up to $29 billion in back taxes, which the tech company has refuted. Yahoo Finance Live takes a closer look at how this claim is weighing on Microsoft stock and what Wall Street institutions are saying about it.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

This post was written by Luke Carberry Mogan.

Video Transcript

BRAD SMITH: All right, guys, Microsoft shares, ticker symbol MSFT.

Light it up.

There it is.

It's down 9/10, 8/10 of a percent here pre-market.

The IRS saying the tech company owes nearly $29 billion in back taxes.

Tech giant disagrees though, saying they have already paid up to $10 billion in taxes and it's not reflected in the adjustments and plans to dispute.

The IRS has had a long running investigation into how Microsoft allocated its profits among countries and locations between 2004 and 2013.

Now, for a lot of where those profits, revenues were recognized, allocated for a lot of big tech companies, there was a renewed focus on this back in 2018, 2017 around the Tax Cuts Act under the Trump administration because of the repatriation that many of those tech companies would have to do.

And the IRS, I think, for years has been trying to wrap their own hands and minds around exactly where some of those taxes still have yet to make their way back to the US for what was repatriated or what should have been paid even in those prior practices as well.

SEANA SMITH: Yeah and just taking a look at the Street's reaction to this, not too big.

As you can see, shares off just about 9/10 of a percent.

But Bank of America out saying that they do not expect a material impact on this.

When you take a look at fiscal year 2024, also fiscal year 2025, they also expect, obviously, like Microsoft has said in their blog post, that they do intend to dispute and also plan to appeal this case.

And it's unlikely to be resolved in the next 12 months.

Analysts are going to be wanting to hear a little bit more about this on the upcoming earnings call that we're going to be getting from Microsoft in just a few weeks from now.

But at least for now, there's not too much concern about what this could mean for Microsoft in the short term.