How to Fill Out Your IR10 Tax Form Using Xero Data

You've been diligently using Xero all year, categorizing transactions and keeping your bank accounts in check. Now, Inland Revenue (IRD) wants its summary, and the IR10 form is waiting. The good news is that if your Xero account is tidy, much of the heavy lifting is already done.

However, Xero doesn't have a "magic export to IR10" button. It's more of a partnership: Xero provides all the numbers you need from its reports, but you must translate them into the correct boxes on the IRD form. Let's walk through how you can use your excellent Xero records to confidently fill out your financial statement summary for tax time.

What is the IR10?

First, what is this form? The IR10 isn’t your tax return itself. Think of it as a detailed appendix you must attach to your main return (like an IR3 for sole traders or an IR4 for companies).

It’s a summary of your financial statements: income, expenses, assets, and liabilities. The IRD uses it to get a standardized snapshot of a business's health and performance. Because they have specific categories they want to see, simply printing your Xero Profit & Loss statement and attaching it to your return won't work. You need to map your data to their format.

Getting the Right Reports from Xero

Before you even look at the IR10, you need to get your Xero reports in order. Your data must be accurate, which means ensuring your bank accounts are fully reconciled to the end of the financial year. If they aren't, stop and reconcile them now. Otherwise, your reports will be incomplete and incorrect.

Once your accounts are reconciled, you need two main reports:

1. The Profit and Loss Report: This shows your income and expenses over the financial year and tells you your net profit or loss.
2. The Balance Sheet Report: This is a snapshot of your assets, liabilities, and equity on a specific date (the last day of the financial year).

To run these reports, go to the 'Accounting' menu in Xero and select 'Reports'. Find the 'Profit and Loss' report and set the date range to your financial year (e.g., April 1st to March 31st). For the 'Balance Sheet', set the date to the last day of your financial year (e.g., March 31st). We recommend exporting both reports to a PDF or spreadsheet to make the next steps easier.

Mapping Xero Accounts to the IR10 Form

This is where the main work begins. The account names in your Xero Chart of Accounts probably don't match the IRD's categories exactly. Your job is to group your Xero accounts and total them up for the correct boxes on the IR10 form.

For example, the IR10 has a section for "Other Direct Costs." In your Xero Profit and Loss report, you might have accounts like 'Subcontractor Fees', 'Materials', and 'Freight'. You would add the totals from these accounts together and enter the final sum into the "Other Direct Costs" box.

Similarly, the IR10 has a catch-all section called "Other Expenses Not Included Above." This is where you can group items that don't fit into other specific expense categories, such as 'Software Subscriptions', 'Printing & Stationery', and 'General Expenses'.

A handy way to do this is to print the IR10 form and your Profit and Loss report. With a pen and calculator, go line-by-line through the IR10, find the matching accounts on your report, and write down the totals. It's a bit old-school, but it works and helps you see exactly where the numbers are coming from.

Quick Walkthrough of Key IR10 Sections

Here are a few key parts of the IR10 and where the information comes from in Xero:

• Income: Your total sales or revenue is at the top of your Profit and Loss (P&L) report. This number goes into the 'Sales / Gross Income' section of the IR10.
• Expenses: The bulk of your P&L report consists of expenses that you'll match up. For example, the 'Rent' total from your P&L goes directly into the 'Rent' box on the IR10. Likewise, 'Wages and Salaries' from your P&L go into the corresponding box on the form.
• Assets and Liabilities: This information comes from your Balance Sheet.
  • The total of all your bank accounts in Xero goes into the 'Cash and Bank' line.
  • 'Accounts Receivable' in Xero is called 'Debtors' by the IRD.
  • 'Accounts Payable' in Xero is called 'Creditors' by the IRD.
  • Fixed assets like vehicles, computers, and equipment also appear on your Balance Sheet and need to be entered on the IR10.

A Note on GST and Non-Deductibles

This is very important. The numbers you put on the IR10 must exclude GST (unless you are not registered for GST). When you run reports in Xero, make sure you select the option to display them on a GST-exclusive basis.

Also, remember that not everything on your P&L is fully tax-deductible. A common example is 'Entertainment Expenses'. In Xero, you might have an 'Entertainment' account, but for tax purposes, you can typically only claim 50% of this cost. You must manually adjust for this when filling out the form. IRD's depreciation rules may also differ from what Xero calculates, so be sure to use the IRD-approved figures.

Final Tips for a Smooth Process

• Owner Drawings: If you are a sole trader, money you take for personal use is not a business expense. In Xero, this should be coded to an equity account like 'Owner Drawings'. This appears on your Balance Sheet, not your P&L, ensuring you don't incorrectly claim personal spending as a business expense.
• Double-Check Your Work: After filling out the IR10, make sure the net profit on the form matches the net profit on your P&L report (after accounting for any adjustments like entertainment or depreciation). If they don't match, you have likely missed or double-counted something.
• Don't Be Afraid to Seek Help: If this is your first time or if your business has a complex structure, it is wise to have an accountant or certified bookkeeper review your work. Paying for an hour or two of their time is a worthwhile investment to ensure your tax return is accurate.

Using Xero makes gathering your financial data incredibly efficient. However, the responsibility is still on you to interpret that data and place it correctly within IRD guidelines. With a systematic approach, you can bridge the gap between Xero reports and a completed IR10, allowing you to file your taxes correctly and with less stress.