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RJWHIS
March 15, 2024
Question

Alabama overtime exemption

  • March 15, 2024
  • 2 replies
  • 0 views

My Alabama overtime exemption is still not working correctly.  It still takes taxes out of overtime pay for my employees.  I created a "dummy" wage rate which appears to be working EXCEPT for it appears to create less tax than the 40 hour week.  Here's what I'm talking about:  40 hour week had Alabama tax withholding of $33.38.  Adding 5 hours overtime with my "dummy" wage rate, the tax withholding became $33.18.  I just don't trust this is working right.  I get that the overtime pay is exempt, but it shouldn't cause the withholding to go down, should it????

 

My "dummy" wage rate was created through Custom Setup.  I am not sure if my previous wage rates were set up in EZ Setup or Custom Setup.  When I setup the "dummy" wage rate, I initially used EZ Setup, and withholding taxes were taken from the overtime pay.  When I used Custom Setup, taxes were actually reduced, though by a small amount.  

 

I spent 3 hours on the phone with Quickbooks yesterday, and he confirmed there were no issues with my program and told me there was still trouble on their end.  Any idea when this will be fixed???????

2 replies

E
Ethel_A12
March 15, 2024

Welcome to the Community, @RJWHIS.

 

Let me share information about your tax withholding in the QuickBooks Desktop payroll after adding the employee's overtime hours.

 

When you add the overtime hours of your employees, the tax withholding will either remain the same or will go down because of the Federal withholding tax as a deduction. This can be the reason why you can see less amount after adding the overtime.

 

Here is an article you can read to learn more about setting up and tracking Alabama overtime exemption: Set up and track Alabama overtime exemption.

 

For future reference, I'm adding this article about e-file and e-pay: Set up state e-file and e-pay in QuickBooks Desktop Payroll Enhanced.

 

Let me know if you have questions about Alabama's overtime exemption. I'm always here to help. Have a great day.

BigRedConsulting
BigRedConsulting
March 16, 2024

Yes, that's what it did when I tested it as well. The more overtime someone gets the less their tax is until it's 0.00. I thought it a comical mistake by Intuit, but...

 

It seems that, weirdly, the more Federal Withholding tax on the check (which of course goes up when you pay the employee more) the relative less State Withholding tax is due in Alabama.

 

This is made more clear because now wages paid over 40 hours per week (whether overtime or not) are not taxable in Alabama, though all hours paid under 40 hours (whether overtime or not) are taxable - which I don't think is what QuickBooks is actually doing, but I can't be sure as I tested this some time ago.

 

The idea that when you work over 40 per week then you owe less state taxes is rather weird, but hey, whatever you want Alabama! I suppose you're such a rich state that you don't need that income tax in any case.

L
LDO
April 11, 2024

I think the idea was to encourage folks to work.  Unfortunately too many folks here in Alabama do not want to work.   

 

The problem is that is really is not that much tax savings and folks know it so it doesn't encourage them to work. 

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