Exempt payee codes on Line 4
The exempt payee code claims exemption from backup withholding on certain payment types. There are thirteen, they apply to entities rather than individuals, and an unsupported entry is a false certification.
Line 4: thirteen codes, entities only
- What it claims
- Exemption from backup withholding on certain payment types
- Valid values
- A single number, 1 to 13
- Who may use it
- Certain entities only. Never individuals or sole proprietors
- If you are unsure
- Leave it blank. A missing code costs nothing
- What it does not do
- It does not exempt you from tax, and it does not stop 1099s
Individuals, freelancers, sole proprietors and disregarded single-member LLCs have no exempt payee code. The instruction on the form is explicit: codes apply only to certain entities, not individuals.
All thirteen codes
| Code | Who it covers | In practice |
|---|---|---|
| 1 | An organization exempt from tax under section 501(a), any individual retirement arrangement (IRA), or a custodial account under section 403(b)(7) if the account satisfies the requirements of section 401(f)(2) | The code for charities, foundations, churches and other 501(c) organizations, and for IRAs. Nonprofits |
| 2 | The United States or any of its agencies or instrumentalities | Federal departments and agencies |
| 3 | A state, the District of Columbia, a U.S. commonwealth or territory, or any of their political subdivisions or instrumentalities | States, counties, cities, school districts, public authorities |
| 4 | A foreign government or any of its political subdivisions, agencies or instrumentalities | Note that a foreign person uses a Form W-8 rather than a W-9. Difference |
| 5 | A corporation | The most used code after 1. Covers C and S corporations, and LLCs taxed as corporations. Detail |
| 6 | A dealer in securities or commodities required to register in the United States, the District of Columbia, or a U.S. commonwealth or territory | Registered broker-dealers |
| 7 | A futures commission merchant registered with the Commodity Futures Trading Commission | CFTC-registered FCMs |
| 8 | A real estate investment trust | REITs. Real estate |
| 9 | An entity registered at all times during the tax year under the Investment Company Act of 1940 | Mutual funds and other registered investment companies |
| 10 | A common trust fund operated by a bank under section 584(a) | Bank-operated common trust funds |
| 11 | A financial institution | Banks, credit unions and savings institutions |
| 12 | A middleman known in the investment community as a nominee or custodian | Nominees and custodians holding for others |
| 13 | A trust exempt from tax under section 664 or described in section 4947 | Charitable remainder trusts and split-interest trusts. Trusts |
Which code applies to you
| If you are... | Code |
|---|---|
| A freelancer, contractor or sole proprietor | None. Leave blank |
| A disregarded single-member LLC | None. You report an individual owner |
| A C or S corporation | 5, if the requester asks for one |
| An LLC taxed as a corporation | 5 |
| An LLC taxed as a partnership | None, unless it qualifies under a specific code |
| A 501(c)(3) charity, church or foundation | 1. A church needs no determination letter to enter it. Detail |
| A city, county or state agency | 3 |
| A federal agency | 2 |
| A bank or credit union | 11 |
| A REIT | 8 |
| A charitable remainder trust | 13 |
| An ordinary family trust | None |
What the code actually does
Exempt payee status concerns backup withholding under IRC section 3406, and nothing else. Three separate ideas get conflated here:
| Exemption from... | What it means | Where it appears |
|---|---|---|
| Backup withholding | The payer does not have to withhold 24% on certain payment types | Line 4, exempt payee code |
| Information reporting | The payer does not have to file a 1099 at all: the corporate payee exception, a rule about payee type and payment type rather than a code you enter | Not entered on the form; the payer applies it |
| Income tax | The entity pays no federal income tax on exempt-function income, under section 501(a) | Determined by the IRS, not by this form |
A corporation entering code 5 is still reported on a 1099 for legal services, medical and health care payments, substitute dividend payments, payments from federal executive agencies, and card and network transactions. Code 5 speaks only to backup withholding; those reporting rules run on their own track.
If the requester leaves Line 4 out
Some substitute W-9s omit Line 4 entirely because the requester makes no payments where the codes matter, and that is permitted. If you are an exempt payee and the form has nowhere to say so, note it in a covering message rather than writing on the form. Writing a code into the margin of a form that has no box for it achieves nothing, since whoever keys the form in has nowhere to put it.
Frequently asked questions
Do individuals have an exempt payee code?
There is none for you to enter. A sole proprietor or single-member LLC leaves the box blank, and so does anyone filing as an individual.
What happens if I enter a code I am not entitled to?
It is a false certification. Part II covers the whole form, and IRC 6682 carries a $500 civil penalty for a false statement affecting withholding. A blank box costs nothing by comparison.
Does an exempt payee code mean my payments are not reported?
No. It concerns backup withholding rather than information reporting. A payer may still file a 1099 for an exempt payee, and several payment types are reportable to corporations regardless.
Which code does a nonprofit use?
Code 1, covering an organization exempt from tax under section 501(a). Nonprofit guidance
Is a partnership an exempt payee?
Not by virtue of being a partnership. Some partnerships qualify under another code, such as a registered securities dealer under code 6, but there is no general partnership exemption.
General information, not tax advice. This page explains a federal tax form in plain English. It is not legal, tax, or accounting advice, and W9Form.org is not affiliated with the IRS. Verify everything against the official Form W-9 page on IRS.gov and speak to a licensed professional about your own situation. How we source and review these pages.