Prepare a IR10 financial statements summary

Overview

The IR10 form is used by Inland Revenue (IR) for statistical purposes, it helps speed up the processing of tax returns and means you don’t need to include your financial statements with your return (although IR may still request them at a later date). 

Assigning accounts to the IR10 in TaxLab can be done:

• In bulk.
• By individual account.
• Via the import from Xero function. 

View the IR10

• From the entity's tax year summary, in the navigation bar select Reports > Tax Return forms.
• Select the Financial Statements Summary (IR10) tab.

Assign accounts in the IR10

Account disclosures can be assigned in the IR10 manually, or through the import from Xero function. Accounts only need to be assigned in the first year. When you roll over to a new tax year, accounts remain allocated to the IR10 disclosure assigned previously. However, any new accounts added will still need to be assigned to a disclosure.

Manually assign accounts to the IR10

1. From the entity's tax year summary, in the navigation bar select Workpapers > Accounts.
2. From the Trial balance, navigate to the IR10 tab. 
3. Select the checkboxes next to the account or accounts you need to assign to an IR10 disclosure.
4. From the IR10 Disclosure dropdown at the top of the tab, select the disclosure you want to assign the account(s) to. For individual accounts in a long list (for example, in a subsequent year where only a few need updating), use the cog icon next to the relevant account to assign the IR10 disclosure.
5. Select Apply.
6. Repeat steps 3 - 5 until all relevant accounts have been assigned to an IR10 disclosure.

Assign accounts to the IR10 via import from Xero

If the Xero chart of accounts (COA) has been mapped to report codes in Xero, this information can be imported when the trial balance is brought in from Xero. This will automatically assign the trial balance accounts to the IR10 disclosures.

1. From the entity's tax year summary, in the navigation bar select Workpapers > Accounts.
2. From the Trial balance, select the dropdown arrow next to the Import button > Import from Xero.
3. Ensure your entity has been connected to the right Xero ledger.
4. Under Import Options, select the checkbox next to ‘Import Reporting Codes’.
5. Select Import Data From Xero.

Assign accounts to the Current Year (CY) Retained Earnings

In order for your IR10 to balance all accounts in the income statement need to be assigned to CY Retained Earnings. 

1. From the entity's tax year summary, in the navigation bar select Workpapers > Accounts.
2. From the Trial balance, navigate to the IR10 tab.
3. Locate the accounts grouped under the heading Income Statement. 
4. In the CY Retained Earnings column select the grey ticks next to every account on the trial balance to turn them blue. A blue tick indicates that an account has been included in the CY retained earnings. 

Complete additional disclosures

The Other information fields at the end of the IR10 are required to be completed, and are not auto-populated by the software. To add disclosure information to these:

1. In the navigation bar select Reports > Tax Return forms.
2. Select the Financial Statements Summary (IR10) tab.
3. Next to the disclosure you need to make a manual adjustment for, select the plus icon to expand.
4. Enter your manual adjustment in the box on the line named Manual.

Accounts not in IR10

To check for any accounts that have not been mapped to the IR10, under “Accounts not in IR10”, select the plus icon to expand Unreconciled. Any accounts that have not been assigned to an IR10 disclosure will be listed. 

Income tax expense accounts should be included here, as they are not to be included in the IR10. 

If any other accounts are displayed:

• Select the cog to the right of the account
• Select the correct IR10 disclosure.

Sense checks

The IR10 workpaper includes built in sense checks to ensure data balances, and will be submitted to Inland Revenue in the correct format.

View the sense checks:

1. In the navigation bar select Reports > Tax Return forms.
2. Select the Financial Statements Summary (IR10) tab.
3. Scroll to the bottom of the screen to find the sections named.

Once all relevant accounts have been assigned to the IR10 and any manual disclosures have been entered, use the sense checks to confirm that all accounts have been assigned correctly and that the IR10 balances.

The Balance check and Profit before tax check should both equal 0, and the Profit before tax per IR10 and Profit before tax per Statement of taxable income should be the same amount.

• If the Profit before tax check and balance checkare not nil:
  • Ensure that all income statement accounts have been included in the CY Retained earnings or manually add the tax year’s profit/loss into the equity section of the IR10. 
  • Ensure that every account with a balance has been assigned to an IR10 disclosure - excluding income tax expense accounts.
• Check that you have coded everything correctly. 
  • If a ‘Sign Convention’ label appears next to a disclosure, this is an indication that there is an account that hasn’t been coded correctly for the IR10., and IR are expecting the balance to be the opposite sign.
• Ensure that income tax expenses have not been assigned to an IR10 disclosure.

Troubleshooting

How are tax adjustments calculated?

If the Tax adjustments displayed on the IR10 do not match your expectations, it is important to understand how they are calculated.

Inland Revenue expects the taxable income on the IR10 to match the taxable income on the corresponding tax return form. For example, in a company, Current year taxable profit/loss in the IR10 is expected to match Total income or net loss in the IR4. 

TaxLab calculates the Tax adjustments in the IR10 as the difference between the IR10 Current year taxable profit and the main form Income after expenses/Total income or net loss. 

Why are subvention payments included in Tax adjustments?

IR requires that Current year taxable profit/loss in the IR10 must match Total income or net loss in the IR4, which does not include subvention payments. Therefore, any subvention payment amount is reported under Tax adjustments in the IR10.

Why are residential rental interest deductions included in Tax adjustments in a Partnership or Look-through Company?

IR requires that Current year taxable profit/loss in the IR10 must match Total income/loss after expenses in the IR7, which does not include residential rental deductions. Therefore, the residential rental deduction amount is reported under Tax adjustments in the IR10.

IR7 and IR10 residential rental disclosures

IR have specified how to include residential rental income and deductions in the IR7 and IR10. Find out more in our support article: Residential rental property workpapers & disclosures

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