New Alabama Overtime Withholding Exemption Rule
Alabama has enacted a new overtime rule for hourly employees by passing House Bill 217. Effective January 1, 2024, overtime pay received by full-time hourly employees will be excluded from being counted as taxable income for Alabama state withholding tax. This new overtime exemption for hourly employees will last through June 30, 2025.
Employers must provide a one-time report that includes the total amount of overtime paid during 2023 and the number of full-time hourly employees who received the pay. This initial report is due January 31, 2024. A Monthly/Quarterly report with the same data requirements will begin in the 2024 tax year. Employers must report the overtime on either the Monthly Form A-6 or the Quarterly Form A-1.
QuickBooks will automatically complete the one-time report on behalf of QuickBooks Desktop Assisted and Online Payroll customers. Desktop DIY customers will need to submit the report when completing their annual Alabama A-3 tax form. A link will be available that will route you to enter this required data manually.
How is QuickBooks supporting these new requirements?
The ability to set up and track exempt overtime wages for hourly employees in now available in both our Desktop and Online payroll products. We have added detailed instructions to assist our Alabama payroll customers in our help article. The article will walk you though exempting overtime wages from Alabama withholding tax, provide helpful examples, and answer general questions about this new agency requirement.
Additional details on this agency change are available on the Alabama Department of Revenue website.