A Guide to Reviewing Your IR10 Financial Statements Summary for Accuracy

You've done the hard work: your profit and loss is calculated, the balance sheet balances, and the annual report is complete. Before you submit your tax return, there's one critical final step: reviewing your IR10 form. It may seem like a simple task of copying numbers, but mistakes on this form can cause significant problems with the Inland Revenue Department (IRD). This review is your final defense against processing delays and automated red flags.

What is the IR10?

First, it’s important to understand that the IR10 is not your actual tax return. The tax return for a company is the IR4, and for a partnership, it's the IR7. The IR10 is a standardized summary of your financial statements, designed for the IRD's systems to process electronically.

The IRD uses this data to build a financial picture of your business and benchmark it against others in your industry. Because this data is processed automatically, accuracy is paramount.

Checklist for Reviewing Your IR10

The best way to ensure accuracy is to work systematically. Grab your finalized and signed financial statements and compare them to your IR10 line by line. Here is a checklist of common problem areas to watch for.

1. Confirm the Basics

   It sounds simple, but basic errors are surprisingly common, especially when managing multiple entities. Check the following details carefully:

   • IRD Number: Double-check that every digit of the IRD number is correct.
   • Entity Name: Ensure the company or partnership name is spelled exactly as it is registered.
   • Balance Date: Make sure the balance date (your financial year-end) is correct. The standard is March 31st, but if you use a different date, ensure it is recorded properly.

2. Ensure the Numbers Match Precisely

   This is a critical step. The numbers on your IR10 must perfectly match the figures in your finalized financial statements. The IRD's systems cross-reference these documents, and even a one-dollar discrepancy can trigger an exception report, delaying your return or prompting a request for more information.

   • Revenue and Expenses: Go through your Profit and Loss Statement (P&L) and compare each line item, such as sales, cost of goods sold, and operating expenses, to the corresponding fields on the IR10. Do not round numbers differently or group items together unless the form specifically instructs you to.
   • Assets and Liabilities: Review your Statement of Financial Position (balance sheet). Verify that bank balances, accounts receivable, fixed assets, accounts payable, and loans all match exactly.

3. Reconcile Net Profit to Taxable Income

   This is a common area for mistakes. Your accounting net profit is often different from your taxable income, and this section of the form explains why. Pay close attention to:

   • Non-Deductible Expenses: Have you added back all expenses that cannot be claimed for tax purposes? Common examples include 50% of entertainment expenses, depreciation claimed at a different rate for tax, and adjustments for the private use of a vehicle.
   • Non-Taxable Income: Don't forget to subtract any income that isn't taxable. While less common, this can include certain government grants or specific capital gains.

   Failing to add back a non-deductible expense is a sure way to underpay your tax, which can lead to penalties and interest if discovered by the IRD.

4. Verify Details of Shareholders or Partners

   The IR10 includes sections for shareholder salaries and current accounts. It's vital that these are reported correctly.

   • Shareholder Salaries: Double-check that any salaries paid to shareholder-employees are reported accurately.
   • Shareholder Current Accounts: Make sure the closing balance of each shareholder's current account on the IR10 matches the figure on your balance sheet. The IRD monitors these accounts—which track money shareholders have put into or taken out of the company—very closely.

5. Check the Right Boxes

   The IR10 contains several "yes/no" questions about your business activities, such as having interests in Controlled Foreign Companies (CFCs), transacting with related parties, or claiming specific tax credits. Rushing through this section and ticking the wrong box can lead to automated queries that are time-consuming to resolve. Read each question carefully to ensure your answer is correct.

Why a Small Mistake Can Be a Big Deal

You might think a small typo is harmless, but the IRD's system is largely automated. Mistakes are typically flagged by computers, not reviewed by a person who can apply judgment. The consequences can range from a minor annoyance to a serious issue.

At best, you may receive a letter or secure message from the IRD asking for clarification, creating extra administrative work. At worst, an incorrect form can lead to an incorrect tax assessment. If that assessment results in an underpayment of tax, you could face interest and penalties. The goal is to file a clean return that slides smoothly through the system.

One Last Review Before You Submit

Before you finally hit "submit" in myIR or hand the documents to your tax agent, perform one final sweep:

• Get a fresh pair of eyes. Ask someone else to look over the form. They are great at catching things you might have missed.
• Read key numbers out loud. Sometimes hearing a number helps you realize it's incorrect in a way that just seeing it does not.
• Check the IRD number one last time. It's that important.

Taking just 15 minutes to carefully review your IR10 form is one of the best investments you can make during tax season. It provides peace of mind and allows you to focus on running your business instead of dealing with avoidable tax administration.