QWED Tax guards for AI payroll and tax verification

QWED-Tax verifies logic deterministically. No probabilities, just rules.

United States (IRS)

ClassificationGuard (IRS Common Law)

Goal: Prevent “Employee Misclassification” lawsuits. Logic: Uses the IRS Common Law test to determine if a worker is a W-2 Employee or 1099 Contractor.

Behavioral Control: Does the employer provide tools/instructions?
Financial Control: Does the employer reimburse expenses?
Relationship: Is it indefinite?

Rule: If you control how they work and pay their expenses, they are an Employee (W-2), even if the AI says “1099”.

from qwed_tax.guards.classification_guard import ClassificationGuard

guard = ClassificationGuard()

result = guard.verify_classification_claim(
    llm_claim="1099",
    facts={
        "provides_tools": True,
        "reimburses_expenses": True,
        "indefinite_relationship": True
    }
)
# {"verified": False, "error": "Misclassification Risk: Facts indicate W2, but AI claimed 1099..."}

ClassificationGuard (ABC Test / Z3)

Goal: Formal verification of worker classification under state-specific ABC Test laws (CA AB5, NJ, MA). Uses the Z3 theorem prover to prove classification correctness. Rule: A worker is a contractor only if all three criteria are met:

A: Free from control and direction
B: Work is outside the usual course of business
C: Customarily engaged in an independent trade

from qwed_tax.jurisdictions.us.classification_guard import ClassificationGuard
from qwed_tax.models import WorkerClassificationParams, State

guard = ClassificationGuard()

params = WorkerClassificationParams(
    worker_id="W001",
    freedom_from_control=True,
    work_outside_usual_business=False,  # Fails criterion B
    customarily_engaged_independently=True,
    state=State.CA
)

result = guard.verify_classification(params, claimed_status_contractor=True)
# {"verified": False, "classification": "Employee (W-2)",
#  "message": "MISCLASSIFICATION: Laws in CA require Employee (W-2). Reasons: Failed B (Core Business Work)"}

Parameter	Type	Required	Description
`params`	`WorkerClassificationParams`	Yes	Worker facts for ABC Test
`claimed_status_contractor`	`bool`	Yes	`True` if the AI claims 1099, `False` if W-2

NexusGuard (Economic Nexus)

Goal: Prevent Sales Tax Evasion. Logic: Checks local state thresholds for 2025.

NY/TX/CA: > $500,000 Sales
FL/IL/PA: > $100,000 Sales

Rule: If YTD Sales > Threshold and AI says “No Tax”, BLOCK.

State	Amount threshold	Transaction threshold
CA	$500,000	—
NY	$500,000	100
TX	$500,000	—
FL	$100,000	—
IL	$100,000	200
PA	$100,000	—
OH	$100,000	200
GA	$100,000	200

PayrollGuard (FICA limits)

Goal: Verify paycheck math. Logic:

Gross-to-Net: Gross - Taxes - Deductions == Net (Exact Decimal match).
Social Security Cap: Enforces 2025 Wage Base Limit ($176,100). Tax stops after this amount.

from qwed_tax.jurisdictions.us.payroll_guard import PayrollGuard
from qwed_tax.models import PayrollEntry, TaxEntry, DeductionEntry, DeductionType
from decimal import Decimal

guard = PayrollGuard()

entry = PayrollEntry(
    employee_id="E001",
    gross_pay=Decimal("5000.00"),
    taxes=[TaxEntry(name="Federal Income Tax", amount=Decimal("800.00"))],
    deductions=[DeductionEntry(name="401k", amount=Decimal("250.00"), type=DeductionType.PRE_TAX)],
    net_pay_claimed=Decimal("3950.00"),
    currency="USD"
)

result = guard.verify_gross_to_net(entry)
# VerificationResult(verified=True, recalculated_net_pay=Decimal('3950.00'), discrepancy=Decimal('0.00'), ...)

WithholdingGuard (W-4 / Z3)

Goal: Verify W-4 exempt status claims using the Z3 theorem prover. Logic: An employee can only claim “Exempt” if they had zero tax liability last year AND expect no liability this year (IRS Pub 505).

from qwed_tax.jurisdictions.us.withholding_guard import WithholdingGuard, W4Form

guard = WithholdingGuard()

form = W4Form(
    employee_id="E001",
    claim_exempt=True,
    tax_liability_last_year=5000.0,  # Had liability last year
    expect_refund_this_year=True
)

result = guard.verify_exempt_status(form)
# {"verified": False, "message": "IRS VIOLATION: Cannot claim 'Exempt' if you had tax liability last year..."}

Parameter	Type	Required	Description
`form`	`W4Form`	Yes	W-4 form data including exempt claim, prior year liability, and expected refund

ReciprocityGuard (State tax / Z3)

Goal: Determine which state receives income tax withholding when an employee lives in one state and works in another. Uses Z3 to prove the correct withholding state under reciprocity agreements. Covered reciprocity pairs: NJ-PA, PA-NJ, MD-PA, PA-MD, VA-MD, MD-VA.

from qwed_tax.jurisdictions.us.reciprocity_guard import ReciprocityGuard
from qwed_tax.models import WorkArrangement, Address, State

guard = ReciprocityGuard()

arrangement = WorkArrangement(
    employee_id="E001",
    residence_address=Address(street="123 Main St", city="Newark", state=State.NJ, zip_code="07102"),
    work_address=Address(street="456 Market St", city="Philadelphia", state=State.PA, zip_code="19103"),
    is_remote=False
)

result = guard.determine_withholding_state(arrangement)
# {"verified": True, "withholding_state": State.NJ,
#  "reason": "Reciprocity Agreement exists between NJ and PA. Withhold for Residence (NJ)."}

AddressGuard

Goal: Verify that zip codes match their claimed state. Uses a simplified heuristic lookup of zip code prefixes.

from qwed_tax.address_guard import AddressGuard
from qwed_tax.models import Address, State

guard = AddressGuard()

result = guard.verify_address(Address(
    street="123 Main St", city="Newark", state=State.NJ, zip_code="90210"
))
# {"verified": False, "message": "MISMATCH: Zip 90210 does not belong to NJ."}

Form1099Guard

Goal: Verify IRS 1099 filing requirements for contractor payments. Logic:

Checks payment amount against filing thresholds by payment type.
Determines which form is required (1099-NEC or 1099-MISC).

Payment Type	Form	Threshold
Non-employee compensation	1099-NEC	$600
Rent	1099-MISC	$600
Royalties	1099-MISC	$10
Attorney fees	1099-MISC	$600

from qwed_tax.jurisdictions.us.form1099_guard import Form1099Guard
from qwed_tax.models import ContractorPayment, PaymentType
from decimal import Decimal

guard = Form1099Guard()

payment = ContractorPayment(
    contractor_id="C001",
    payment_type=PaymentType.NON_EMPLOYEE_COMPENSATION,
    amount=Decimal("700.00"),
    calendar_year=2024
)

result = guard.verify_filing_requirement(payment)
# {"filing_required": True, "form": "1099-NEC", "reason": "..."}

Payment types without a defined filing rule return {"filing_required": False, "form": None} with a descriptive reason.

India (CBDT)

CryptoTaxGuard (Sec 115BBH)

Rule: Losses from Virtual Digital Assets (VDA) cannot be set off against any other income (including other VDA gains). Two verification methods:

verify_set_off() — Blocks any AI attempt to reduce tax liability using crypto losses.
verify_flat_tax_rate() — Verifies the strict 30% flat tax on positive VDA income.

from qwed_tax.jurisdictions.india.guards.crypto_guard import CryptoTaxGuard
from decimal import Decimal

guard = CryptoTaxGuard()

# Verify set-off compliance
result = guard.verify_set_off(
    losses={"VDA": Decimal("-5000")},
    gains={"BUSINESS": Decimal("10000")}
)
# TaxResult(verified=False, message="Section 115BBH Alert: Loss from VDA cannot be set off...")

# Verify flat tax rate
result = guard.verify_flat_tax_rate(
    vda_income=Decimal("100000"),
    claimed_tax=Decimal("30000")
)
# TaxResult(verified=True, message="VDA Tax correct (30% of 100000)")

GSTGuard (RCM)

Rule: Certain services (GTA, Legal) require Reverse Charge Mechanism (Recipient pays tax).

Service	Provider	Recipient	Liability
GTA	Any	Body Corporate / Partnership	RCM (Recipient)
Legal	Any	Body Corporate	RCM (Recipient)
Security	Non-Body Corporate	Body Corporate	RCM (Recipient)

from qwed_tax.jurisdictions.india.guards.gst_guard import GSTGuard, ServiceType, EntityType

guard = GSTGuard()

result = guard.verify_rcm_applicability(
    service=ServiceType.LEGAL,
    provider=EntityType.INDIVIDUAL,
    recipient=EntityType.BODY_CORPORATE
)
# {"verified": True, "liability": "RECIPIENT (RCM)", "is_rcm": True,
#  "reason": "Legal service to Business Entity attracts RCM."}

InvestmentGuard (Trading / Z3)

Goal: Classify stock market income into the correct tax head using the Z3 theorem prover.

Intraday = Speculative Business Income (Slab Rate, Sec 43(5))
Delivery = Capital Gains (STCG/LTCG based on holding period)
F&O = Non-Speculative Business Income

from qwed_tax.jurisdictions.india.guards.investment_guard import InvestmentGuard, TransactionType

guard = InvestmentGuard()

result = guard.verify_classification(
    tx_type=TransactionType.INTRADAY,
    holding_period_days=0
)
# {"classification": "Speculative Business Income", "tax_treatment": "Added to Total Income (Slab Rate)", "verified": True}

InterHeadAdjustmentGuard (Set-off matrix)

Goal: Enforce the full inter-head set-off rules for Indian income tax. Uses a prohibition matrix to block illegal loss adjustments.

Loss head	Can set off against
Speculative Business	Only Speculative Business profit
Long-term Capital Gains	Only Long-term Capital Gains
Short-term Capital Gains	Short-term or Long-term Capital Gains
VDA (Crypto)	Nothing (lapses entirely)

from qwed_tax.jurisdictions.india.guards.setoff_guard import InterHeadAdjustmentGuard, TaxHead

guard = InterHeadAdjustmentGuard()

result = guard.verify_setoff(
    loss_head=TaxHead.VDA,
    profit_head=TaxHead.SALARY
)
# {"verified": False, "message": "Illegal Set-Off: Loss from VDA cannot be set off against anything (it lapses)."}

DepositRateGuard

Goal: Verify bank deposit interest rates, specifically senior citizen premiums (60+).

from qwed_tax.jurisdictions.india.guards.deposit_guard import DepositRateGuard
from decimal import Decimal

guard = DepositRateGuard()

result = guard.verify_fd_rate(
    age=65,
    base_rate=Decimal("7.00"),
    claimed_rate=Decimal("7.00"),  # Missing senior premium
    senior_premium=Decimal("0.50")
)
# RateCheckResult(verified=False, expected_rate=Decimal('7.50'), claimed_rate=Decimal('7.00'),
#  message="Rate Error: Age 65 should get 7.50%, but LLM claimed 7.00%.")

Parameter	Type	Required	Default	Description
`age`	`int`	Yes	—	Customer age
`base_rate`	`Decimal`	Yes	—	Base FD interest rate
`claimed_rate`	`Decimal`	Yes	—	Rate claimed by the AI
`senior_premium`	`Decimal`	No	`0.50`	Additional rate for 60+

SpeculationGuard

Rule: Intraday (Speculative) losses can only be set off against Intraday (Speculative) profits. They cannot reduce F&O or Delivery income. Losses must be carried forward for up to 4 years.

CapitalGainsGuard

Goal: Classify assets as STCG or LTCG based on holding period and verify the statutory tax rate.

Asset type	LTCG threshold	LTCG rate (FY 2024-25)	STCG rate
Equity	> 365 days	12.5%	20%
Real estate	> 730 days	—	—
Debt	> 1095 days	Slab rate	Slab rate

Accounts payable guards (Indirect Tax)

Goal: Automate GST/VAT and TDS compliance. Logic:

InputCreditGuard: Checks Section 17(5) “Blocked List”.
- Food/Beverages: Blocked.
- Motor Vehicles: Blocked (unless transport biz).
- Gift to Employee: Blocked only above INR 50,000. Gifts below the threshold are ITC-eligible.
TDSGuard: Calculates withholding based on service type.
- Professional Fees: 10% (Sec 194J).
- Contractors: 1% or 2% (Sec 194C).
- Commission: 5% (Sec 194H).
- Rent (Land): 10% (Sec 194I).

Service type	Threshold (INR)	TDS rate	Section
Professional Fees	30,000	10%	194J
Contractor (Individual)	30,000	1%	194C
Contractor (Firm)	30,000	2%	194C
Commission	15,000	5%	194H
Rent (Land)	2,40,000	10%	194I

Category matching for InputCreditGuard uses exact match (not substring). Ensure you pass the canonical category name (e.g., FOOD_AND_BEVERAGE, MOTOR_VEHICLE, GIFT_TO_EMPLOYEE).

CorporateGuard (Loans and valuation)

Goal: Corporate Governance (Sec 185/Valuation). Logic:

RelatedPartyGuard: Prohibits loans to Directors/Relatives/Holding-Co-Directors unless specific exemptions apply. Also enforces interest rate benchmarking under Section 186.
ValuationGuard: Deterministically calculates Convertible Note conversion prices (min(Cap, Discount)).

Prohibited borrower roles: DIRECTOR, DIRECTOR_RELATIVE, PARTNER, PARTNER_OF_DIRECTOR, HOLDING_COMPANY_DIRECTOR.

International

DTAAGuard (Foreign Tax Credit)

Goal: Verify Foreign Tax Credit (FTC) eligibility under Double Taxation Avoidance Agreements. Logic:

Basic Credit: Allowable credit = min(Foreign Tax Paid, Home Tax Payable on foreign income).
Treaty Rate Limit: When a DTAA treaty rate is provided, the credit is further capped at the treaty-limited amount.
Excess Lapsed: Any foreign tax paid above the allowable credit is reported as lapsed.

from qwed_tax.guards.dtaa_guard import DTAAGuard

guard = DTAAGuard()

# Without treaty rate — simple min(foreign_tax, home_tax)
result = guard.verify_foreign_tax_credit(
    foreign_income=1000,
    foreign_tax_paid=200,
    home_tax_rate=15.0
)
# allowable_credit: 150.0, excess_tax_lapsed: 50.0

# With treaty rate — credit further capped by treaty limit
result = guard.verify_foreign_tax_credit(
    foreign_income=1000,
    foreign_tax_paid=200,
    home_tax_rate=30.0,
    foreign_tax_limit_rate=10.0  # Treaty caps at 10%
)
# allowable_credit: 100.0, excess_tax_lapsed: 100.0

Parameter	Type	Required	Default	Description
`foreign_income`	`float`	Yes	—	Income earned in foreign jurisdiction
`foreign_tax_paid`	`float`	Yes	—	Tax paid in foreign jurisdiction
`home_tax_rate`	`float`	Yes	—	Home country tax rate (percentage)
`foreign_tax_limit_rate`	`float`	No	`None`	DTAA treaty rate limit (percentage). When `None`, no treaty cap is applied

TransferPricingGuard (Arm’s Length Price)

Goal: Verify that related-party transactions are priced within an acceptable range of the Arm’s Length Price (ALP). Ref: OECD Guidelines, US Sec 482, India Sec 92C.

from qwed_tax.guards.transfer_pricing_guard import TransferPricingGuard

guard = TransferPricingGuard()

result = guard.verify_arms_length_price(
    transaction_price=80.0,
    benchmark_price=100.0,
    method="CUP",
    tolerance_percent=3.0
)
# {"verified": False, "risk": "TRANSFER_PRICING_ADJUSTMENT",
#  "message": "Price 80 deviates from ALP 100 beyond 3.0% tolerance.",
#  "safe_harbour_range": [97.0, 103.0], "potential_adjustment": 20.0}

Parameter	Type	Required	Default	Description
`transaction_price`	`float`	Yes	—	Actual price charged to/by related party
`benchmark_price`	`float`	Yes	—	Arm’s Length Price (ALP) from analysis
`method`	`str`	No	`"CUP"`	Transfer pricing method (e.g., CUP, TNMM)
`tolerance_percent`	`float`	No	`3.0`	Safe harbour tolerance percentage

PoEMGuard (Place of Effective Management)

Goal: Determine tax residency of foreign companies under CBDT Circular 6 of 2017 and OECD models. Logic: A foreign company is treated as Indian Resident if it fails the Active Business Outside India (ABOI) test AND its key management is in India. ABOI test criteria (all must be true to pass):

Assets outside India >= 50%
Employees outside India >= 50%
Payroll outside India >= 50%

from qwed_tax.guards.poem_guard import PoEMGuard

guard = PoEMGuard()

result = guard.determine_residency(
    company_name="GlobalCorp Ltd",
    is_foreign_incorp=True,
    turnover_total=10000000,
    turnover_outside_india=3000000,
    assets_total=5000000,
    assets_outside_india=1000000,   # 20% — fails ABOI
    employees_total=100,
    employees_outside_india=20,     # 20% — fails ABOI
    payroll_total=1000000,
    payroll_outside_india=200000,   # 20% — fails ABOI
    key_management_location="India"
)
# {"verified": True, "residency": "RESIDENT", "is_aboi": False,
#  "reason": "Fails ABOI test AND Key Management is in India (PoEM established)."}

Parameter	Type	Required	Description
`company_name`	`str`	Yes	Name of the company
`is_foreign_incorp`	`bool`	Yes	Whether incorporated outside India
`turnover_total`	`float`	Yes	Total turnover
`turnover_outside_india`	`float`	Yes	Turnover outside India
`assets_total`	`float`	Yes	Total assets
`assets_outside_india`	`float`	Yes	Assets outside India
`employees_total`	`int`	Yes	Total employee count
`employees_outside_india`	`int`	Yes	Employees outside India
`payroll_total`	`float`	Yes	Total payroll expense
`payroll_outside_india`	`float`	Yes	Payroll expense outside India
`key_management_location`	`str`	Yes	Where key management decisions are made

RemittanceGuard (FEMA/LRS)

Goal: Prevent forex violations. Logic:

LRS Limit: Enforces $250,000 annual limit per PAN.
Prohibited List: Blocks Gambling, Lottery, Racing, and Margin Trading.
TCS Logic: Applies 20% tax for generic remittance, 5% for Education/Medical. Education with loan funding is 0.5%. Threshold exemption of INR 7,00,000.

Purpose	TCS rate	Notes
Education (loan-funded)	0.5%	Above INR 7L threshold
Education (self-funded)	5%	Above INR 7L threshold
Medical	5%	Above INR 7L threshold
All other	20%	Above INR 7L threshold

QWED Finance

QWED Legal

QWED Tax

QWED Infra

QWED Tax guards for AI payroll and tax verification

United States (IRS)

ClassificationGuard (IRS Common Law)

ClassificationGuard (ABC Test / Z3)

NexusGuard (Economic Nexus)

PayrollGuard (FICA limits)

WithholdingGuard (W-4 / Z3)

ReciprocityGuard (State tax / Z3)

AddressGuard

Form1099Guard

India (CBDT)

CryptoTaxGuard (Sec 115BBH)

GSTGuard (RCM)

InvestmentGuard (Trading / Z3)

InterHeadAdjustmentGuard (Set-off matrix)

DepositRateGuard

SpeculationGuard

CapitalGainsGuard

Accounts payable guards (Indirect Tax)

CorporateGuard (Loans and valuation)

International

DTAAGuard (Foreign Tax Credit)

TransferPricingGuard (Arm’s Length Price)

PoEMGuard (Place of Effective Management)

RemittanceGuard (FEMA/LRS)

QWED Finance

QWED Legal

QWED Tax

QWED Infra

​United States (IRS)

​ClassificationGuard (IRS Common Law)

​ClassificationGuard (ABC Test / Z3)

​NexusGuard (Economic Nexus)

​PayrollGuard (FICA limits)

​WithholdingGuard (W-4 / Z3)

​ReciprocityGuard (State tax / Z3)

​AddressGuard

​Form1099Guard

​India (CBDT)

​CryptoTaxGuard (Sec 115BBH)

​GSTGuard (RCM)

​InvestmentGuard (Trading / Z3)

​InterHeadAdjustmentGuard (Set-off matrix)

​DepositRateGuard

​SpeculationGuard

​CapitalGainsGuard

​Accounts payable guards (Indirect Tax)

​CorporateGuard (Loans and valuation)

​International

​DTAAGuard (Foreign Tax Credit)

​TransferPricingGuard (Arm’s Length Price)

​PoEMGuard (Place of Effective Management)

​RemittanceGuard (FEMA/LRS)

United States (IRS)

ClassificationGuard (IRS Common Law)

ClassificationGuard (ABC Test / Z3)

NexusGuard (Economic Nexus)

PayrollGuard (FICA limits)

WithholdingGuard (W-4 / Z3)

ReciprocityGuard (State tax / Z3)

AddressGuard

Form1099Guard

India (CBDT)

CryptoTaxGuard (Sec 115BBH)

GSTGuard (RCM)

InvestmentGuard (Trading / Z3)

InterHeadAdjustmentGuard (Set-off matrix)

DepositRateGuard

SpeculationGuard

CapitalGainsGuard

Accounts payable guards (Indirect Tax)

CorporateGuard (Loans and valuation)

International

DTAAGuard (Foreign Tax Credit)

TransferPricingGuard (Arm’s Length Price)

PoEMGuard (Place of Effective Management)

RemittanceGuard (FEMA/LRS)