Alabama OT nightmare ... we pay OT over 32 hours worked

The state website says that overtime exemption is only for hours worked over 40.

Hello there, @LDO.

I understand the importance of accurately tracking OT hours in QuickBooks.

To handle this in QuickBooks Online Payroll, you'd need to set up the overtime rules accordingly to calculate overtime based on the policy you've established.

Starting January 1 this year, if an hourly employee works more than 40 hours in a week, the pay from those extra hours is exempt from Alabama (AL) income tax. With this, QuickBooks added an option to enter the tax-exempt amount for AL income tax. Refer to the following steps below to do it:

1. Go to the Payroll menu, then choose Employees.
2. Click Run Payroll.
3. From your employee list, select Actions, then Add tax-exempt pay.
4. Enter the tax-exempt pay dollar amount and hit Add.
5. Repeat steps 3 - 5 for each employee with tax-exempt amounts.

Moreover, check this handy article to learn more about AL overtime: Set up and track Alabama overtime exemption.

Stay in touch if you have any other questions or concerns related to payroll tasks. I'll be right here to answer them for you.

When is this product going to be updated to actually work?  And how are we supposed to process our payroll until it does??

When are the changes going to actually roll into QuickBooks??  And how are we supposed to process payroll correctly until that happens??

I have spoken with 4 different QuickBooks representatives and not one of them is aware of the Alabama Overtime change, therefore they have been unable to help at all.  I spent over an hour on the phone yesterday, re-running payroll updates and rebooting my computer over and over, with zero results.  And now I've been on the phone this morning for already 30 minutes and have still yet to find a person that knows anything about this change.  I asked to speak with a Manager, and have been left on hold.  How are we supposed to process payroll when no one from QuickBooks will help or even seems to realize there is a problem?

Thanks for joining the thread, PR.

I understand the urgency of this matter. Also, I'll take note of your experience with the support representative to the concerned team so you don't have to experience such difficulties again. Your satisfaction is important to us, and we'll do everything we can to make things right.

The update are effective from January 1, 2024, if an hourly employee works more than 40 hours in a week, the pay from those extra hours is exempt from AL income tax. We rolled out an updates and added the option to enter the tax-exempt amount for AL income tax in QuickBooks. 

Here's how:

1. Go to Payroll menu, choose Employees.
2. Click Run Payroll. 
3. From your employee list, select Actions, then Add tax-exempt pay.
4. Enter the tax-exempt pay dollar amount and hit Add.
5. Repeat steps 3 - 5 for each employee with tax-exempt amounts
   
   Here's a screenshot for visual reference: 

    

    

   
   
   

Please check out this article for additional details: Set up and track Alabama overtime exemption.

Just in case you want to run payroll reports to view useful information about your business and employees, you can check out this article for further guidance: Run payroll reports.

Come back to this post if you have clarification about managing payroll in the program. I'll always be happy to assist you.

I do not think this has anything to do with the browser or rebooting a computer. 

I believe  Carneil_C  answered us without understanding the problem.  I submitted payroll yesterday,  but i just left off the Overtime.  No one had much overtime given it was a holiday week,      Since I didn't even try to add OT I am not sure what problems I will encounter next week.  I think it should work, but I did read where others are saying the tax is not being calculated  right.   
My current two big questions are:

1) Do I still manually enter the Overtime hours and then go to Actions and declare those overtime hours exempt. Or do I just enter the Regular hours and skip entering the overtime hours, but then go to Actions and enter the exempt amount.  I ask this because I cant figure out why the instructions are telling us to manually figure the overtime dollar amount????  Why should we have to do this since entering the OT hours does this for us?

2)  On holiday weeks we pay overtime on over 32 if an employee was paid for the Holiday.  The state website says that to be exempt the OT must be over 40.    So if Fred had 32 Regular hours, 8 holiday hours and 11 overtime hours.  How am i suppose to handle the overtime.    8 of those 11 overtime hours will be subject to tax, but 3overtime hours  will not?
Thanks

I was finally able to speak with a Payroll Manager at Quickbooks (after being transferred 4 times) that told me he had an update yesterday afternoon that the overtime exemption is NOT working.  The code was sent to us to set up, but the actual process of it withholding correctly has not been pushed out to QuickBooks, and QuickBooks apparently did not feel the need to tell us this.  This Manager told me that a new update is due out Friday, the 5th and that it will hopefully correct our problem.  QuickBooks is aware that the process is not working, and yet they keep allowing posts to continue saying to try this and try that.  This is the response I got from QuickBooks on my last post, which is absolutely unacceptable.

Please know that we're aware of this matter, but we don't have any specific time-frame when will this issue be fixed. Rest assured that you'll receive communication when the ability to set up and track this new Alabama requirement becomes available in QuickBooks Payroll.

If you want to process payroll for your employees, you can still run payroll as you normally do, but please know that you're still unable to file forms until the issue is fixed. Once you receive an update, you'll want to reach out to our QuickBooks Payroll Support Team for payroll corrections.

So their answer is to keep running payroll, meaning that our employees withholdings are wrong.  And we won't be able to file our reports with the State of Alabama until they get this fixed, but have no idea when that will be???

PR MGR,    Your last post hits the nail on the head.   Thank you!

"QuickBooks is aware that the process is not working, and yet they keep allowing posts to continue saying to try this and try that. "

This is a long time ongoing problem with the Quick Book community forum agents. 
I have asked before are the agents getting paid by the word?
I have asked before do they even read our questions as the majority of answers indicate that they have not. 
I have suggested that they be required to read our questions out loud 3 times before they post.

I have lamented that they have unhelpful canned responses.  I do not need to see them to say "That is unfortunate" or  "we want you to have a good experience"  I just want an answer, and should not be required to wade through a bunch of feel good comments that serve no purpose but to make it seem like they care.
I actually like the product, but get frustrated with all the unhelpful answers.

I did the update today.  It is NOT working.  Spent over 2 hours on the phone today with them.  Clueless.

I hear everyone's sentiments about the Alabama overtime withholding, and I see how updates are relevant for you and your business. Allow me to share timely information on this matter.

Effective January 1, 2024, if an hourly employee works more than 40 hours a week, the pay from those extra hours is exempt from AL income tax. Here are several insights regarding the AL OT exemption:

• Overtime pay is exempt only for full-time hourly employees. It doesn’t include salaried employees.
• Work performed over 40 hours in a week is exempt, whether it’s paid as overtime or regular pay.
• The exemption applies to all paycheck dates on or after January 1, 2024, through June 30, 2025. 
• Overtime pay earned more than 8 hours a day under collective bargaining agreements isn’t exempt if your employees don’t work more than 40 hours in the week. 
• This info needs to be reported on either a monthly or quarterly basis and Form W-2.

In addition to that, you may utilize this reference to guide you in calculating the tax-exempt amounts: Set up and track Alabama overtime exemption. It's best to manually calculate the tax-exempt pay amount and add it to your employees when running your payroll.

Moreover, if you’ve set up to have QuickBooks automatically pay and file your payroll taxes or you do them electronically through QuickBooks, QuickBooks handles the reporting to Alabama for you. 

I appreciate your patience and understanding about this matter. Please feel free to get back on this thread if you have additional questions when managing Alabama OT. Keep safe.

PLEASE stop with these canned responses telling us to contact Customer Service!!!  The response we need is WHEN will this update start working so that we (the customers paying your salary) can properly process our payrolls???

Here's a little work around that I HOPE will work until QB's gets their stuff together and makes their program compliant with all state taxes!!  We also have weird OT pay (our employees don't always work 40 hours before they get OT, Sat is always time and half and Sunday is always double time, regardless of what is worked during the week and some jobs the employees receive OT for any hours over 8 hours per day - see examples below)

I created new overtime payroll items and the new pitem does not add to the AL WH total, but it does deduct from it, even if the total hours entered on the employees payroll is not totaled to 40 hours. 

So, #1 - Quickbooks is not calculating hours over 40 hours for the amount to NOT be taxed by AL WH, regardless of what the pay rate is, like it says it will in the HELP ARTICLE  they are using to help people set up the new AL OT WH:

Understand AL overtime exemption

• Overtime pay is exempt only for full-time hourly employees.  It doesn’t include salaried employees.
• Work performed over 40 hours in a week is exempt, whether it’s paid as overtime or regular pay.
• The exemption applies to all paycheck dates on or after January 1, 2024 through June 30, 2025. 
• Overtime pay earned in excess of 8 hours a day under collective bargaining agreements aren’t exempt if your employees don’t work more than 40 hours in the week. 
• This info needs to be reported on either a monthly or quarterly basis, and on Form W-2.

Our employees do not have to work 40 hours to receive overtime - saturdays are always time and a half, Sundays are always double time, and some jobs anything over 8 hrs each day is overtime. 

#2- I need QB's to calculate 40 hours (regardless if it's 40 hours straight time; or if it's 30 hours straight time, 4 hours time and half, and 6 hrs double time) before it stops calculating AL WH on any other overtime hours that the employee works in a week. (example - employee worked 46 hours total - 30 hours straight time, 10 hours time and half and 6 hours double time - in this scenario the 30 hrs straight time and 10 hours time and half should be taxed, the 6 hours double time should not be taxed by AL WH). 

#3 - We all need QB to calculate the aggregate gross OT pay total that is NOT being taxed and this info to be able to be ran on a report and put on our AL WH tax forms and W2's, like it says that QB's is going to do in the Help Article

     Report the tax-exempt amounts to AL 

   This info needs to be reported on either a monthly (AL A-6) or quarterly (AL A-1) basis, and on Form W-2.

The work around I have come up with for right now until QB's gets their stuff together and can do it for us, like they say they will, is this:

Here’s my work around so I can run payroll tomorrow and until QB fixes this (***I added new wage related payroll items, which did not end up calculating AL WH):

I have 1 straight time payroll item (which does calculate AL WH)

I have 2 time and half payroll items (1 old one (1.5x) which IS calculating AL WH; and 1 new one that I just added (OT 1.5x (exempt)) which is NOT calculating AL WH <but it is deducting from AL WH, which I’m not sure it should be doing>.

I also have 2 double time payroll items (1 old one (2x) which IS calculating AL WH; and 1 new one that I just added (dbl time 2x (exempt)) which is NOT calculating AL WH <but it is deducting from AL WH, which I’m not sure it should be doing>.

Since I need AL WH to calculate hours up to 40 hours regardless of if its straight time, OT, or double time, I will use the 1 straight time pitem for all straight hours, then I will use the old 1.5x pitem and 2x pitem to add any time that is needed to get the total hours to 40 hours – all of these pitems will calculate AL WH….THEN I will use the new pitems (OT 1.5x exempt and dbl time exempt) for any hours over 40 hours, since these pitems are NOT calculating (adding) to AL WH.

Then I can run a report on just the new pitems and see how much the gross totals were that AL WH was NOT calculated on, which is what we need for the AL WH tax forms.

Maybe this will help someone else set up their payroll for time being. I am worried that it is deducting some from AL WH instead of not deducting any amount at all, but the amount it deducts really is not that much and the main thing is that it does not add to AL WH when I enter OT hours after the 40 hours that should be calculating on AL WH)

ALSO - for us to be able to set up OT that is not calculated on AL WH for the AL OT Exemption - we need to have the ability to edit the AL WH payroll item and when we get to the TAXABLE COMPENSATION box be able to unselect the OT payroll item that we do NOT want to be taxed. As of right now, when I go to edit AL WH payroll item I get this message:

Hi all,  

Joining the thread to inform you that we've rolled out updates and added the option to exempt Alabama state income tax for overtime pay in QuickBooks. Please make sure to update your payroll tax table for the changes to take effect. You can scan through this handy guide for more details: Set up and track Alabama overtime exemption.

In case you encounter the same issue, we recommend reaching out to our payroll team so we can add you to the affected users and implement applicable fixes.

Please add comments if you have other payroll-related concerns. The Community will be here to help.

I just spent another 2 hours on the phone with yet another QuickBooks representative.  And like the 10 others I've talked to or chatted with over the last 2 weeks, she told me something completely different.  And no, my problem was not resolved.  She said there was a huge volume of calls from Alabama users because the calculation is NOT working.  Calling in to Customer Service continues to be useless and a waste of time until the problem gets resolved by the programmers at QuickBooks, which has NOT happened.  I was told today that the escalation to the "back-end" programmers did not actually happen until yesterday.  How that is possible, I have no idea! 

Alabama users, per my latest conversation with a QuickBooks representative, our only workaround until the programmers get this working, whenever that may be, is to create 2 separate checks for each hourly employee - one for the first 40 hours that are not subject to the exemption and one for overtime hours after 40 that are subject to the exemption.  On that second check, you will zero the Alabama taxes withheld.  And unfortunately, this doesn't address the problem of tracking the exempt wages if you are an employer that pays overtime on a Holiday week or pays daily overtime over 8 hours. 

QuickBooks has failed Alabama users on this one.  I still don't understand why QuickBooks can't clearly communicate this to the Alabama users.  Why are they forcing us to spend hours and hours on the phones with representatives that they know will not be able to help us because the problem has not been fixed????