How it works
Four facts, in order.
There is no model here and nothing is inferred. WithholdWatch compares what you have paid each contractor against a published threshold, finds the payment that crossed it, and applies a published rate to everything from that payment onward. Every figure it uses is in a table you can read.
01
The threshold
A dollar figure per reporting box, per tax year, published by the IRS with a statute behind it. It is not one number: nonemployee compensation, royalties and gross proceeds paid to an attorney have never shared a threshold.
02
The crossing
The payment that takes a payee’s year-to-date reportable total to or past that figure. WithholdWatch records the date. From then on the payee is reportable, and so is the payment that crossed.
03
The W-9
A valid form on file is the thing that protects you. Missing, expired, refused or mismatched are four different states and WithholdWatch keeps them apart, because they need four different actions.
04
The rate
Where a payee is reportable and the form is not on file, backup withholding was required on those payments. The published rate applied to them is the figure WithholdWatch shows you.
The crossing
The subtraction almost everyone gets wrong
The intuitive method is to subtract the threshold: you were allowed that much, so only the excess counts. It is wrong, and it is wrong in the direction that flatters you. The payment that crosses the threshold is reportable in full — you do not get to keep the part of it that sat below the line.
One payee · TY2026
Threshold $2,000.00·Rate 24%
| Invoice | Amount | Year to date | Reportable |
|---|---|---|---|
| February invoice | $900.00 | $900.00 | — |
| April invoicecrosses the threshold | $1,300.00 | $2,200.00 | $1,300.00 |
| June invoice | $700.00 | $2,900.00 | $700.00 |
| Reportable from the crossing invoice onward | $2,000.00 |
Derived from the 2026 nonemployee-compensation threshold of $2,000.00 and a rate of 24%. Illustrative — not your figures.
Counting from the crossing payment
$480.00
$2,000.00 reportable at 24%. What was already required.
Subtracting the threshold instead
$216.00
The intuitive method understates the same payee by $264.00, because it hands back the part of the crossing invoice that sat below the line.
Reference
Threshold Ledger
The table below is the one the product reads. Not a copy of it, and not a summary written from memory — this page and your dashboard resolve the same rows.
| Reporting box | 2027 | 2026 | 2025 | Statute |
|---|---|---|---|---|
| Nonemployee compensation (1099-NEC) | Not yet published | $2,000.00 | $600.00 | IRC 6041A(a); indexed under IRC 6041(h) |
| Rents (1099-MISC) | Not yet published | $2,000.00 | $600.00 | IRC 6041(a); indexed under IRC 6041(h) |
| Other income (1099-MISC) | Not yet published | $2,000.00 | $600.00 | IRC 6041(a); indexed under IRC 6041(h) |
| Medical and health care payments (1099-MISC) | Not yet published | $2,000.00 | $600.00 | IRC 6041(a); indexed under IRC 6041(h) |
| Royalties (1099-MISC) | $10.00 | $10.00 | $10.00 | IRC 6050N |
| Gross proceeds paid to an attorney (1099-MISC) | $600.00 | $600.00 | $600.00 | IRC 6045(f) |
| Card or third-party network (1099-K) | $20,000.00 | $20,000.00 | $20,000.00 | IRC 6050W |
A cell reading “Not yet published” is not zero and it is not last year’s figure. Where the IRS has not published a number, WithholdWatch shows those words on every screen the number would have appeared on.
WithholdWatch measures against federal thresholds only. Several states set their own, lower filing thresholds. Check your state's requirements separately.
If your contractor files and pays their own tax, the IRS does not collect this amount from you a second time — you claim that relief on Form 4670, and that relief requires a signed Form 4669 from each contractor, declaring under penalties of perjury where they reported the payment on their own return. What is not relieved is the penalties, the additions to tax and the interest, and those are computed on this figure. This is the number you have to chase a W-9 to make go away.
Exclusions
The payments WithholdWatch leaves out
Anything you paid by card is excluded
Card payments are reported by the processor, not by you. WithholdWatch marks them excluded and says why on the payment itself, so a payee who looks unreportable is never a mystery.
Third-party network payments are a setting, not a guess
Whether payments through a third-party network reach you or the network is genuinely unsettled at small volumes, because the network’s own reporting threshold is high and has a transaction-count test as well.WithholdWatch excludes them by default, following Reg. 1.6041-1(a)(1)(iv): the settlement organisation reports the transaction on a 1099-K and the payor files nothing, so counting it here as well would double-count the same money — and it puts the switch on a settings page with that trade-off written next to it, rather than burying the assumption in a query.
A payee who filed with you last year can have no threshold at all
Where the lookback applies, the effective threshold is zero and the first dollar is reportable. WithholdWatchkeeps “we do not know” as its own state on that question rather than defaulting it to “no”, and counts how many payees are in it on your dashboard.
A projection is labelled as one, or it is not shown
The headline figure contains no forecast, so it cannot fall because the calendar advanced. The projected year-end figure and the conservative ceiling appear together underneath it, and where there is too little history to project, that row says so instead of showing a number.
The product
The six things it does
Exposure Monitor
/exposure
In the first release.
The dollar figure you are already required to have withheld, per contractor and for the whole team.
- Unprotected Exposure — what is already required on payments you have made.
- A projected year-end figure and a conservative ceiling, always shown as a pair.
- Per contractor: year-to-date reportable spend, the date they crossed, and the figure that crossing produced.
W-9 Vault
/contractors
In the first release.
Every contractor’s W-9 status, when it was received, when it goes stale, and who you have chased.
- Status on every payee: missing, requested, valid, expired, TIN mismatch or refused.
- Request history, so you can show you asked and when.
- The last four digits of the taxpayer number only. WithholdWatch does not display a full TIN.
Threshold Ledger
/how-it-works
In the first release. The published table is readable here and drives every figure in the product.
The published IRS threshold for each reporting box and tax year, with the statute it comes from.
- Per box, not per year: nonemployee compensation, rents, royalties, medical, attorney proceeds and card or third-party network are not one number.
- Each row carries its citation, so you can check the figure rather than trust it.
- A year whose figure the IRS has not published reads “Not yet published”, never last year’s number.
Crossing Alerts
/how-it-works
In development
Partly in the first release. The rules screen ships on the Core plan and the rules are stored and editable; no message is delivered yet, so an enabled rule is recorded rather than sent.
A message before a payee crosses, on the day they cross, and when a W-9 you hold expires.
- At a chosen percentage of the threshold, while there is still time to collect the form.
- On the actual crossing payment.
- On W-9 expiry, which is the failure nobody watches for.
Payment Import
/payments/import
In the first release.
Bring a CSV of contractors or payments, map the columns, see what will happen, then commit it.
- A validation preview that names every row it will skip and why.
- Full taxpayer numbers are rejected at the preview, not stored and then hidden.
- Every import is one batch and every batch can be reverted whole.
Filing Readiness
/how-it-works
In the first release, on the Firm plan.
For each tax year: how many returns you owe, the computed deadline, and what is blocking you.
- Deadlines are computed against the weekend rule, not typed in — two of the next three move.
- Blockers are listed by payee: missing form, expired form, TIN mismatch.
- Electronic-filing status against the published aggregate return minimum.
Deadlines
Dates WithholdWatch computes rather than assumes
- TY2026 filing deadline
- Feb 1, 2027
- Copy owed to the contractor
- Feb 1, 2027
Neither date is typed into this page. The statutory date can land on a weekend, and when it does it moves — two of the next three filing deadlines are not the date most calendars print.