Skill: 1kalin/afrexai-payroll-audit (version 1.0.0)

# Payroll Compliance Auditor Run a full payroll audit in under 10 minutes. Catches the errors that cost companies $845 per violation. ## What It Does - Classifies workers (W-2 vs 1099) using the IRS 20-factor test - Audits overtime calculations against FLSA rules - Checks tax withholding accuracy (federal, state, local) - Flags misclassification risk with dollar-amount exposure estimates - Generates quarterly compliance checklists - Produces audit-ready reports for DOL or state agency reviews ## How to Use Tell your agent: **Full payroll audit:** "Run a payroll compliance audit for [company]. We have [X] employees across [states]. Pay frequency is [weekly/biweekly/monthly]." **Worker classification check:** "Check if these roles should be W-2 or 1099: [list roles with descriptions]." **Overtime audit:** "Audit overtime compliance. Our employees work [schedule]. We're in [state]. Current OT policy: [describe]." **Tax withholding review:** "Review tax withholding setup for employees in [states]. We use [payroll provider]." ## Audit Framework ### 1. Worker Classification (IRS 20-Factor Test) Score each worker across three categories: - **Behavioral Control** (6 factors): Instructions, training, integration, personal services, hiring assistants, work hours - **Financial Control** (5 factors): Business expenses, investment, profit/loss opportunity, market availability, method of payment - **Relationship Type** (4 factors): Written contracts, benefits, permanency, key services **Risk levels:** - 0-4 factors toward employee → Low risk (likely contractor) - 5-9 factors → Medium risk (review needed) - 10+ factors → High risk (likely misclassified) **Penalty exposure per misclassified worker:** - Back employment taxes: 15.3% of wages - FLSA overtime liability: up to 3 years back pay - Benefits liability: retirement, health, PTO - IRS penalties: $50-$260 per W-2 failure - State penalties vary: $5K-$25K per violation (CA, NY, MA highest) ### 2. Overtime Compliance (FLSA + State) Check against federal AND state rules (state wins when more generous): | Rule | Federal (FLSA) | California | New York | Washington | |------|---------------|------------|----------|------------| | OT threshold | 40 hrs/week | 8 hrs/day OR 40/week | 40 hrs/week | 40 hrs/week | | OT rate | 1.5x | 1.5x (2x after 12 hrs/day) | 1.5x | 1.5x | | Salary exemption | $58,656/yr (2026) | $66,560/yr | $62,400/yr (NYC) | $67,724.80/yr | | 7th day rule | None | 1.5x first 8 hrs, 2x after | None | None | **Common violations:** - Averaging hours across two weeks (illegal under FLSA) - Not paying OT on bonuses/commissions - Misclassifying non-exempt as exempt - Rounding errors exceeding 7-minute threshold - Auto-deducting meal breaks not actually taken ### 3. Tax Withholding Accuracy Verify against current tables: **Federal:** - 2026 FICA: 6.2% SS (wage base $174,900) + 1.45% Medicare - Additional Medicare: 0.9% above $200K single / $250K married - FUTA: 6.0% first $7,000 (5.4% credit = 0.6% effective) **State cross-checks:** - SUI rates (experience-rated — verify annual notice) - SDI/PFL (CA, NJ, NY, WA, MA, CT, OR, CO, MD) - Local taxes (NYC, Philadelphia, San Francisco, etc.) - Reciprocity agreements (employees in different state than work) ### 4. Quarterly Compliance Checklist **Monthly:** - [ ] Reconcile payroll register to GL - [ ] Verify new hire reporting (within 20 days) - [ ] Check garnishment calculations - [ ] Review PTO accrual accuracy **Quarterly:** - [ ] File Form 941 (federal) by last day of following month - [ ] File state unemployment reports - [ ] Reconcile YTD withholdings to pay stubs - [ ] Review contractor payments approaching $600 threshold - [ ] Audit benefit deductions against enrollment **Annual:** - [ ] W-2 distribution by January 31 - [ ] 1099-NEC filing by January 31 - [ ] ACA reporting (1095-C) by March 2 - [ ] Update salary exemption thresholds - [ ] Review state minimum wage changes - [ ] Workers' comp audit preparation ### 5. Audit Report Format ``` PAYROLL COMPLIANCE AUDIT REPORT Company: [Name] Period: [Q1/Q2/Q3/Q4 YYYY] Employees: [Count] States: [List] Audit Date: [Date] EXECUTIVE SUMMARY Overall Risk Score: [Low/Medium/High/Critical] Issues Found: [Count] Estimated Exposure: $[Amount] FINDINGS [F-001] [Category] - [Severity] Description: [What's wrong] Exposure: $[Amount] Remediation: [Fix] Deadline: [Date] RECOMMENDATIONS 1. [Priority action] 2. [Secondary action] 3. [Long-term improvement] ``` ## Cost of Getting It Wrong | Violation | Average Penalty | |-----------|----------------| | Misclassification (per worker) | $12,000-$25,000 | | FLSA overtime (per employee) | $1,000-$10,000 + back pay | | Late W-2/1099 filing | $50-$580 per form | | Failure to deposit taxes | 2%-15% of deposit | | Willful failure | $100K+ fine + criminal | The DOL recovered $274M in back wages in 2024. Average investigation finds $1,150 per employee owed. ## Who This Is For - HR teams without dedicated payroll compliance staff - Growing companies expanding to new states - Businesses using contractors heavily (tech, construction, healthcare) - Anyone who just got a DOL audit letter --- *Built by [AfrexAI](https://afrexai-cto.github.io/context-packs/) — AI context packs for business operations. Full compliance automation: [$47 Professional Services Pack](https://afrexai-cto.github.io/context-packs/).* *Calculate what payroll errors are costing you: [AI Revenue Calculator](https://afrexai-cto.github.io/ai-revenue-calculator/)* *Set up your own compliance agent in 5 minutes: [Agent Setup Wizard](https://afrexai-cto.github.io/agent-setup/)*

path: README.md
content: # Payroll Compliance Auditor

Run a complete payroll audit — worker classification, overtime compliance, tax withholding accuracy, and quarterly checklists. Catches the mistakes that cost $845 per violation on average.

## Features
- IRS 20-factor worker classification test (W-2 vs 1099)
- FLSA + state-specific overtime rule checking
- Federal and state tax withholding verification
- Misclassification exposure calculator
- Quarterly/annual compliance checklists
- Audit-ready report generation

## Quick Start
Tell your agent: "Run a payroll compliance audit for my company. 50 employees across CA, NY, and TX."

## Who It's For
HR teams, growing companies expanding to new states, contractor-heavy businesses, anyone facing a DOL audit.

## More from AfrexAI
- [AI Context Packs](https://afrexai-cto.github.io/context-packs/) — $47 industry packs for instant agent expertise
- [AI Revenue Calculator](https://afrexai-cto.github.io/ai-revenue-calculator/) — Find where you're losing money
- [Agent Setup Wizard](https://afrexai-cto.github.io/agent-setup/) — Deploy your first agent in 5 minutes


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