Skip to main content
K
kgd5829
February 6, 2024
Question

Alabama Overtime Exemption - any resolution?

  • February 6, 2024
  • 2 replies
  • 0 views

I would really rather join a productive ongoing discussion about how to get an answer to this issue, but seeing as there are multiple posts with no resolution, it appears the only option is to flood the discussions with numerous topics stating the same problem.

 

The new Alabama Overtime Withholding Exemption item is not working as expected.  I have followed the instructions provided at the end of last year to the best of my understanding, and none of the overtime paid this year (as in hours over 40 per week) appears to be exempting from state tax as it's supposed to.  Also, the Payroll Item Detail report shows nothing but zeros for the activity.  The AL - OT Withholding Exemption payroll item is on each employees information as instructed.

I've been running the payroll update function each day; currently we're on tax table 22404, payroll version 02030622.

The current main indicator of an ongoing issue is when I run my state report form in Quickbooks, form A6 Report for Alabama Withholding.  It has "Number of employees with exempt overtime wages" showing the count of ALL paid employees when it should read 2.  The next line is for "Total amount of exempt overtime wages paid" and shows ALL wages paid for the month of January when it should show only a few hundred dollars.

If there is a manual fix, we need it from Support now please, in detail.

The answer is not "contact payroll support," because I did that and went round in circles for about half an hour updating payroll files.  I reported to the support agent I received an error code, and upon my report of the error, the agent left the chat!

Even if those affected are in the minority, some uniform communication from Intuit is needed on how to address the issue.  It seems remarkably inefficient to expect each user to individually contact support only to be left twisting in the wind (and no closer to an answer).

Fortunately, given there were only 2 employees with OT last month, I can manually perform the needed reporting to the state, but I still have no reason to believe so far that the withholding is following the intention of our state.  Maybe this week's payroll will be correct since there is a newly installed update, but I'm not optimistic.

    2 replies

    BigRedConsulting
    BigRedConsulting
    February 6, 2024

    I've seen complaints about this form pop up quite a few times so I thought I'd research it.

     

    The AL rules appear to state that:

    For full time, and hourly employees who work more than 40 hours per week, whether or not you paid them overtime for the hours over 40 (and only over 40), the wages from those hours are exempt from withholding tax.

     

    However, what QuickBooks is actually doing is quite different. It isn't following those rules at all!

    QuickBooks is very simple-mindedly exempting all wages paid using an hourly overtime item. It is including OT wages paid to part-time employees, OT wages paid to salaried employees, and OT wages paid when there is less than 40 hours of work in a week. And it does not include wages over 40 hours per week that were paid using a standard hourly item.

     

    This could explain a few things.

     

    RE: none of the overtime paid this year (as in hours over 40 per week) appears to be exempting from state tax as it's supposed to.

     

    Appears where? I assume you mean on the paychecks? If so, did you use special overtime type pay item for the overtime? If not, that's why.

     

    If you are noticing that the AL - OT Withholding Exemption item is 0.00 on the paycheck, that is actually how it (weirdly) works.

     

    RE: The AL - OT Withholding Exemption payroll item is on each employees information as instructed.

     

    Is the item also on each paycheck with a calculated amount equal to the overtime paid? (Adding the item to the employees after you create the paychecks won't work. The other tax has to be on the paychecks in order for it to flow to the form.)

     

    RE: It has "Number of employees with exempt overtime wages" showing the count of ALL paid employees when it should read 2.

     

    It will show all of the employee where an overtime item is used on a paycheck with a non-zero number of hours. Do all of the employees use an overtime item? To check, start on the payroll item list and edit the hourly item(s) used by your employees and check the title of the window for the text "(Hourly Wage: Overtime)".  If it says that, then it's an overtime item. If it doesn't, it's not (regardless of how you use the item or what it is called).

     

    RE: The next line is for "Total amount of exempt overtime wages paid" and shows ALL wages paid for the month of January when it should show only a few hundred dollars.

     

    I don't know how all of your wages for January could be exempt. It suggests that you paid all of your wages using an overtime item. See previous answer to check your earnings items to see which ones are overtime items.

    ----------------------------

     

    Note that the form will only be right if you:

    1) Pay all wages over 40 hours per week using an overtime item.

    2) Don't use an overtime item for overtime items wages where the employee worked less than 40 regular time hours per week. If you must pay overtime in this case (you may be required to), then create and use a regular hourly item as if it is overtime to fake out QuickBooks.

    3) Only use overtime items for hourly employees.

    4) Remove the AL - OT Withholding Exemption other tax item from part time employee's employee record. In this case, then you can pay them overtime and it won't be included on the form - because the AL - OT Withholding Exemption item won't be included on their paychecks.

     

    ----------------------------

    In testing I did see something that seems wrong, but I'm not sure:

    For employees/paychecks with the AL - OT Withholding Exemption item, I found that paying overtime actually reduced the state income tax withholding amount. The more OT wages I added to the same regular wages on the paycheck, the less the tax until it was 0.00. This doesn't really seems right. It seems unlikely that employees who earn overtime owe less money to the state when they file than if they hadn't earning it. The same, maybe, but less?

      K
      kgd5829Author
      February 7, 2024

      Just got off the phone with a representative from Intuit's Payroll Escalation Team, who reached out to me -- very pleased with that, by the way.  I believe they understand the specific issue I'm seeing and how the calculations are not performing as expected. She walked me through removing the OT Exemption item from non-hourly employees, and verified it had no effect on the A6 Withholding report.  Also we set up a new Overtime item with the EZ-Setup method, altered a prior paycheck to use this item, and saw that it also had no effect on the A6 reporting.

      So they are still working on it.  I was very pleased with the level of support here, even though we didn't get a resolution yet.  Of course the calculations on overtime exemption week to week are likely still off, but I feel more confident we'll get there soon and I can clean it up afterwards.

       

      To address your specific points:

      1) Pay all wages over 40 hours per week using an overtime item.

      Verified this is what we are doing.

      2) Don't use an overtime item for overtime items wages where the employee worked less than 40 regular time hours per week. If you must pay overtime in this case (you may be required to), then create and use a regular hourly item as if it is overtime to fake out QuickBooks.

      Can confirm this is correct, we do not use overtime for any wages from hours less than 40.

      3) Only use overtime items for hourly employees.

      Confirmed, we only use OT Payroll items for hourly employees.

      4) Remove the AL - OT Withholding Exemption other tax item from part time employee's employee record. In this case, then you can pay them overtime and it won't be included on the form - because the AL - OT Withholding Exemption item won't be included on their paychecks.

      No part time employees, so not applicable.

       

      Other items you mentioned, yes we are using overtime pay items for overtime pay.  And the new OT Exemption item was added to each employees Tax Info per instructions before the first paycheck of 2024.

      Also, all overtime items read "Hourly Wage: <payroll item name> Overtime".  We have multiple overtime payroll items based on which General Ledger Direct Job Cost account we want to use.  This was demonstrated to the Escalation rep, also.

       

      Thanks for your helpful input, @BigRedConsulting!  Also appreciate the follow-up from @Rasa-LilaM.  I really didn't expect someone to reach out, so I'm hopeful we'll find a resolution soon.

       

        BigRedConsulting
        BigRedConsulting
        February 7, 2024

        So where are you at with the report?

         

        It seems like it should be working if your data is recorded appropriately - and it seems to be from your description.

         

        R
        Rasa-LilaM
        February 6, 2024

        Thank you for turning to the Community about your payroll concern, kgd5829.

         

        It is concerning to hear that the new Alabama Overtime Withholding Exemption item is not working as expected. It appears that even though you followed the provided instructions, none of the overtime paid this year seems to be exempt from state tax as it was supposed to be.

         

        With this, we'll forward your case to our Next Level Help team. They'll review the comments and recent cases with support. You can expect them to contact you within 1-2 business days to provide further assistance.

         

        I also want to make sure you have the resources needed to complete any payroll-related activity. The following link contains topics about managing your employees' information and handling tax notices to name a few: QuickBooks Desktop Payroll.

         

        Feel free to reach out again if you need further assistance with payroll and other QuickBooks concerns. The Community is always here to lend a hand. 

        Terms & ConditionsAccessibility statement