Do Business Codes Matter for Taxes?

Business codes probably aren’t as important as you think, but there are still a few things that are worth knowing about business codes.

Why does the IRS ask for a business code?

Business codes help the IRS understand what type of work you do. Even though you also describe your business, people use different words for the same thing. Numbered business codes are a lot easier for the IRS to match up.

The main way the IRS uses business codes is to compare statistics for groups of businesses.

For example, the first code on the IRS list is 110000 for Agriculture, forestry, hunting, and fishing. The IRS can look up all the businesses using that code and see how much money they made, what their deductions were, and what their profit margins were.

One way that the IRS uses this information is to decide who to audit. If your numbers are way outside of the normal ranges for similar businesses, the IRS might take a closer look at your tax return.

What happens if you choose the wrong business code?

There’s not really anything that happens if you choose the wrong business code. The reason is that it doesn’t change what taxes you pay or how much you owe.

So if you’re used to the IRS charging you a lot of money for mistakes, it’s only natural to worry about making sure you choose the right business code. But since the IRS mostly only cares that you pay the right amount of tax, the business code is not a big deal.

If you’re worried about audits, there are other ways the IRS can understand what business you’re in. They can look at your description of your business, who paid you, and what kind of business expenses you claimed.

How do you pick the right business code?

While the IRS gives a list of business codes, you’ll probably have a hard time finding the right code. The business activity codes cover mostly old-fashioned businesses like manufacturing companies and retail stores.

Many technology companies and gig economy jobs like ridesharing and personal shopping don’t clearly fit into any of the codes. There are three things you can do:

• Find the closest match
• If you can’t find something that fits, some of the categories have an “Other X Businesses” code
• If nothing fits at all, enter 999999 for unclassified businesses.

IRS Business Codes List

These are the main IRS business codes.

Agriculture, Forestry, Hunting, Fishing

• 110000 Agriculture, forestry, hunting and fishing
• 111000 Crop production

Mining

• 211110 Oil and gas extraction
• 211120 Crude petroleum extraction
• 211130 Natural gas extraction
• 212000 Mining (except oil and gas)

Utilities

• 221000 Utilities

Construction

• 230000 Construction
• 236000 Construction of buildings

Manufacturing

• 310000 Manufacturing
• 323100 Printing and related support activities
• 339110 Medical equipment and supplies manufacturing

Wholesale Trade

• 423000 Merchant wholesalers, durable goods
• 424000 Merchant wholesalers, nondurable goods

Retail Trade

• 441100 Automobile dealers
• 442000 Furniture and home furnishings stores
• 444100 Building materials and supplies dealers
• 445100 Grocery stores
• 445200 Specialty food stores
• 446110 Pharmacies and drug stores
• 446199 All other health and personal care stores
• 448000 Clothing and clothing accessories stores
• 451110 Sporting goods stores
• 451211 Book stores
• 452000 General merchandise stores
• 453000 Miscellaneous store retailers
• 453220 Gift, novelty, and souvenir stores
• 453310 Used merchandise stores
• 454110 Electronic shopping and mail-order houses

Transportation and Warehousing

• 480000 Transportation
• 485000 Transit and ground passenger transportation
• 493000 Warehousing and storage

Information

• 511110 Newspaper publishers (except Internet)
• 511120 Periodical publishers (except Internet)
• 511130 Book publishers (except Internet)
• 511140 Directory and mailing list publishers (except Internet)
• 511190 Other publishers (except Internet)
• 512000 Motion picture and sound recording industries
• 515100 Radio and television broadcasting (except Internet)
• 517000 Telecommunications
• (including paging, cellular, satellite, cable, other telecommunications, and Internet service providers)
• 519100 Other information services (including news syndicates and libraries)
• 519130 Internet Publishing and Broadcast

Data Processing Services

• 518210 Data Processing, Hosting, and Related Services

Finance and Insurance

• 522100 Depository credit intermediation (including commercial banking, savings institutions, and credit unions)
• 522200 Nondepository credit intermediation (including credit card issuing and sales financing)
• 522110 Credit card issuing
• 522220 Sales Financing
• 522291 Consumer lending
• 522292 Real estate credit
• 522298 Other nondepository credit intermediation
• 523000 Securities, commodity contracts, and other financial investments and related activities
• 523920 Portfolio management
• 523930 Investment advice
• 524113 Direct life insurance carriers
• 524114 Direct health and medical insurance carriers
• 524126 Direct property and casualty insurance carriers
• 524130 Reinsurance carriers
• 524292 Third-party administration of insurance and pension funds
• 524298 All other insurance-related activities
• 525100 Insurance and employee benefit funds
• 525920 Trusts, estates, and agency accounts
• 525990 Other Financial vehicles (including mortgage REITs)

Real Estate and Rental Leasing

• 531110 Lessors of residential buildings and dwellings (including equity REITs)
• 531120 Lessors of nonresidential buildings (except mini warehouses) (including equity REITs)
• 531190 Lessors of other real estate property (including equity REITs)
• 531310 Real estate property managers
• 531390 Other activities related to real estate
• 532000 Rental and leasing services
• 532420 Office machinery and equipment rental and leasing

Professional, Scientific, and Technical Services

• 541100 Legal services
• 541990 Consumer credit counseling services
• 541200 Accounting, tax preparation, bookkeeping, and payroll services
• 541300 Architectural, engineering, and related services
• 541380 Testing laboratories
• 541511 Custom computer programming services
• 541519 Other computer-related services
• 541610 Management consulting services
• 541700 Scientific research and development services
• 541800 Advertising and related services
• 541860 Direct mail advertising
• 541900 Other professional, scientific, and technical services

Management of Companies and Enterprises

• 551111 Offices of bank holding companies
• 551112 Offices of other holding companies

Administrative and Support Services

• 561000 Administrative and support services
• 561300 Employment services
• 561439 Other business service centers
• 561499 All other business support services
• 561500 Travel arrangement and reservation services
• 561520 Tour operators
• 561700 Services to buildings and dwellings

Waste Management and Remediation Services

• 562000 Waste management and remediation services (sanitary services)

Educational Services

• 611420 Computer training
• 611430 Professional and management development training
• 611600 Other schools and instruction (other than elementary and secondary schools or colleges and universities, which should select a code to describe their unrelated activities)
• 611710 Educational support services

Healthcare and Social Assistance

• 621110 Offices of physicians
• 621300 Offices of other health practitioners
• 621400 Outpatient care centers
• 621500 Medical and diagnostic laboratories
• 621610 Home health care services
• 621910 Ambulance services
• 621990 All other ambulatory health care services
• 623000 Nursing and residential care facilities
• 623990 Other residential care facilities
• 624100 Individual and family services
• 624110 Community centers (except rec. only), youth Adoption agencies
• 624200 Community food and housing, and emergency and other relief services
• 624210 Meal delivery programs, Soup kitchens, or Food banks
• 624310 Vocational rehabilitation services
• 624410 Child day care services

Arts, Entertainment, and Recreation

• 711110 Theater companies and dinner theaters
• 711120 Dance companies
• 711130 Musical groups and artists
• 711190 Other performing art companies
• 711210 Spectator sports (including sports clubs and racetracks)
• 711300 Promoters of performing arts, sports, and similar events
• 713110 Amusement and theme parks
• 713200 Gambling industries
• 713910 Golf courses and country clubs
• 713940 Fitness and recreational sports centers
• 713990 All other amusement and recreation industries (including skiing facilities, marinas, and bowling centers)

Accommodation and Food Services

• 721000 Accommodation
• 721110 Hotels and motels (except casino hotels)
• 721210 RV (recreational vehicle) parks and recreational camps
• 721310 Rooming and boarding houses, dormitories, and workers’ camps
• 722320 Caterers
• 722440 Drinking places (alcoholic beverages)
• 722511 Full-service restaurants
• 722513 Limited-service restaurants
• 722514 Cafeterias and buffets
• 722515 Snack and non-alcoholic beverage bars

Other Services

• 811000 Repair and maintenance
• 812300 Drycleaning and laundry services
• 812900 Other personal services
• 812930 Parking lots and garages

Other

• 900001 Investment activities of section 501(c)(7), (9), or (17) organizations
• 900002 Rental of personal property
• 900003 Passive income activities with controlled organizations

If you can’t find a good code, don’t be afraid to use 999999.