How to Fill Out an IR10 Form Correctly: A Step-by-Step Guide

As a self-employed individual, partner, or trust owner, the end of the business year means it's time to tackle your paperwork, including the IR10 form. While it may seem daunting, the IR10 is simply a summary of your business's financial performance for the year. It's not a full tax return, but rather a standardized report of key financial figures that you'll need for your IR3, IR6, or IR7 return.

This guide will walk you through the process step-by-step to help you complete the form accurately and with confidence.

What Is an IR10 Form?

The IR10 is a summary of your financial statements. It takes the detailed information from your profit and loss statement and balance sheet and presents it in a standardized format for the Inland Revenue Department (IRD). If you are self-employed, a partner in a partnership, or receive income from an estate or trust, you are generally required to file an IR10. The final profit or loss figure calculated on your IR10 is transferred directly to your main income tax return (IR3, IR7 for partnerships, or IR6 for estates/trusts).

Before You Start: Get Organized

A little preparation can make filling out the IR10 form much simpler. Before you begin, gather the following information:

• Your personal Inland Revenue Department (IRD) number and your business's IRD number, if applicable.
• Your financial statements for the year, including your Profit and Loss Statement and Balance Sheet. Accounting software like Xero or MYOB can generate these reports easily.
• A list of all your business assets, including their purchase dates and costs, to help create the depreciation schedule.
• A categorized summary of your business income and related expenses.
• Your GST records, if you are registered for GST.

Filling Out the IR10: A Section-by-Section Guide

Let's dive into the document itself. While the layout may vary slightly from year to year, the core sections remain consistent.

1. Business Details (Page 1)

   This section is straightforward and requires basic information about your business:

   • Your name and IRD number.
   • The name of your business or activity.
   • The Business Industry Classification (BIC) code that best describes your operations. You can find this on the IRD website.
   • The financial period the summary covers (usually April 1 to March 31).

   Important: Double-check that your IRD number is correct. A simple mistake here can cause significant delays and issues later.

2. Financial Information (Main Summary Section)

   This is the heart of the IR10, where you summarize your income and expenses. You will transfer the totals from your own financial records into the corresponding fields on the form.

   • Gross sales or income: This is your total turnover for the year before any expenses are deducted. It corresponds to the top line of your Profit and Loss Statement.
   • Cost of goods sold: If your business sells products, you calculate this using the formula: (Value of opening stock) + (Purchases) - (Value of closing stock). If you provide services like consulting, you can likely leave this blank.
   • Other income: Record any other business-related income here, such as interest earned on a business bank account.
   • Expenses: List the total costs incurred to run your business. The form provides specific categories for common expenses:
     • Rent
     • Vehicle costs
     • Repairs and maintenance
     • Depreciation
     • Insurance
     • Interest expenses
     • Payments to contractors
     • General expenses (for anything that doesn't fit into other categories)

   Summing up your total income and subtracting your total expenses will give you your net profit or loss. This is the most critical figure on the form.

3. Asset and Depreciation Schedule

   This section, which often causes confusion, is where you list your business assets, such as vehicles, computers, tools, and office furniture. Depreciation is the process of claiming a portion of an asset's cost as an expense each year to account for its loss in value.

   For each asset or group of assets, you need to record:

   • Opening book value: The asset's value at the start of the year.
   • New assets purchased: The cost of any assets you bought during the year.
   • Assets sold: The details of any assets you disposed of during the year.
   • Depreciation rate: The IRD provides standard rates for different types of assets.
   • Depreciation claimed: The total amount of depreciation you are claiming for the year.
   • Closing book value: The asset's value at the end of the year.

   Depreciation calculations can be tricky. If you are not confident, consider seeking professional assistance for this section.

Common Mistakes to Avoid

Watch out for these common pitfalls when completing your IR10:

• Mixing Personal and Business Expenses: Only claim expenses that are directly related to your business. If an asset like a car is used for both business and personal trips, you can only claim the business-use portion of its running costs.
• Forgetting Income: It's easy to overlook small side jobs or interest income. Ensure you declare all sources of business income.
• Mathematical Errors: Always double-check your calculations before finalizing the form. Using accounting software can significantly reduce the risk of math errors.
• Incorrectly Claiming Expenses: Some expenses have limits. For example, entertainment expenses are typically only 50% deductible for tax purposes, even if you paid 100% of the cost. The IR10's reconciliation section helps you adjust for these differences.

Final Thoughts

Once your IR10 is complete, transfer the net profit or loss figure to the appropriate box on your main tax return (e.g., IR3) and file both forms with the IRD. While it is possible to complete the IR10 yourself, don't hesitate to seek help if you get stuck. An accountant or tax agent can provide peace of mind and ensure everything is filed correctly, saving you time and potential stress. This allows you to focus on what you do best: running your business.