Question

AL OT Exemption

4 replies
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Why does all full and part time employees have an amount in Box 14 (OT Exemption)of W2 ? When filling AL withholding taxes, no exempt overtime wages to report was selected because no employees had overtime pay.

QuickBooks Desktop

JenoP

QuickBooks Team

This can happen if an overtime hourly item is included in a paycheck, even if there's no amount or actual overtime, Bookkeeper 1. Let me guide you through the steps to clear the amount in Box 14 of the W2 forms.

To start, make sure to update QuickBooks Desktop to the latest release. This will provide you with the most recent maintenance updates that can resolve minor bugs that may have caused the amount to appear on the form.

Next, let's run a Payroll Summary report to check if an overtime item was inadvertently used in some paychecks. Here's how:

Go to the Reports menu, look for Employees and Payroll, then choose Payroll Summary.
Change the dates in the Report Period section to Last Calendar Year.
Search for a payroll item that was created or designated as overtime. Then, click on the corresponding amount (even if it’s zero). This will provide you with a list of paychecks that include that item.
Click on the paycheck to open it. Then, choose Paycheck Detail.
Look for an overtime item that doesn't have any hours or amount, then remove it completely.
Select Save or Save and close.
Repeat the same steps for the rest of the paychecks.

After that, open the W2 forms once again to check if the amount on Box 14 is already cleared out.

Let me also share this article for additional guidance on this matter: Fix Alabama Overtime Exempt calculations in QuickBooks Desktop Payroll.

For additional guidance on managing overtime payroll items in QuickBooks, I recommend reviewing these helpful resources:

Please don't hesitate to reach out again if you encounter any challenges with employee payments or tax form filing in QuickBooks Desktop. Simply post your question, and we'll be glad to help.

B

Bookkeeper 1Author

Ok, thanks for the reply. Will this have any effect on the employees W2 since of course they've already received for 2024?

E

Erika_K

QuickBooks Team

On behalf of my colleague, you're most welcome, Bookkeeper 1.

Indeed, this will affect your employees' W-2 forms. To fix this, you'll need to issue corrected W-2 forms (W-2c).

Filing W-2c forms depends on your payroll service. For Payroll Assisted, contact our live support team directly to request a correction. We will handle the correction and file the W-2c form with the Social Security Administration (SSA). You will receive a copy of the W-2c to provide to your employee and an updated W-3 copy for your records.

However, if you have a Payroll Enhanced service, create your W-2c and W-3c forms in QuickBooks and print them on perforated paper (not pre-printed). Then, file the corrected forms to the SSA manually.

Here’s how to do it:

Navigate to the Employees menu, then Payroll Center.
Pick the File Forms tab.
Select Annual Form W-2c/W-3c - corrected Wage and Tax Statement, then Create Form.
Select the last name of the employee and then OK.
Choose the employee(s) who need a W-2c. Hit Review/Edit.
Answer the question: Have you made the W-2 corrections in QuickBooks Desktop? If yes, the current QuickBooks Desktop information will appear in the Correct Information column on the W-2c. Enter the Previously Reported amount for the items that need correction. If no, the current QuickBooks Desktop information will appear in the Previously Reported column on the W-2c. Review each W-2c worksheet and enter the correct amounts in the Correct Information column.
Review each page and click Next as needed.
Tick the box, Check if this is a W-2c (corrected W-2).
Fill in only the lines that need correction in the Previously Reported and Correct Information columns. Do this on Federal, State, and local info as necessary.
Remove the amounts from the remaining lines. Right-click on the amounts and select Override, then delete it. Do this on Federal, State, and local info as needed.

Alternatively, for Payroll Basic and Standard, prepare and file a W-2c form with the SSA manually. For detailed guidance, refer to the General Instructions for Forms W-2c and W-3c within the General Instructions for Forms W-2 and W-3.

Lastly, I've compiled articles to help you understand the W-2 filing process, distribution timelines, and the latest updates for 1099s and W-2s this year:

Tag me in the comments below if you have follow-up questions about filing corrected W-2s. I'm here to make sure you get all the assistance you need.

BigRedConsulting

Level 15

@Bookkeeper 1 RE: Why does all full and part time employees have an amount in Box 14 (OT Exemption)of W2 ? When filling AL withholding taxes, no exempt overtime wages to report was selected because no employees had overtime pay.

I didn't know what "Overtime exemption" was and then read this statement at https://www.revenue.alabama.gov/individual-corporate/overtime-pay-exemption-amended/ :

For the tax period beginning on or after October 1, 2024, amounts paid as overtime compensation in accordance with the Fair Labor Standards Act shall be excluded from gross income and therefore exempt from Alabama state income tax. Tied with this exemption are employer reporting requirements to ALDOR. Employers are required to report the total aggregate amount of exempt overtime paid and the total number of employees who received exempt overtime pay.

So, basically, that probably means all overtime pay will appear in box 14 for he last quarter of last year.

However, you note that you didn't pay any overtime pay. You don't mention what the dollar amount of the OT pay was in the boxes. I assume it wasn't 0.00.

If it was a non zero amount, does it relate in any way to the wages you paid? Is it the same or almost the same as 33% of wages paid in the last quarter, for example? If so, then I suspect you've been using an overtime earnings item inadvertently to pay regular pay - because a 1.5x overtime rate ends up making 33% of the total pay the extra overtime amount.

You can check to see if this is the case by editing the hourly earnings items used to pay the employees.

If you press Next and the second slide of the item looks like this, then it's an overtime item:

Hope this helps!

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