Alabama Overtime Earnings Exempt From State Income Tax

Owned by Dale Parker
02 26, 2024
2 min read

Issue/Symptom/Question

For the tax year beginning on January 1, 2024, overtime pay received by a full-time hourly wage paid employee for hours worked above 40 in any given week are exempt from Alabama state income tax.

As of now, it looks like this only runs through June 30, 2025.

Applies To

Penta for Windows

State Income Tax Calculation for Alabama

Resolution/Fix/Answer

The state income tax calculation for Alabama has been modified for check dates between January 1, 2024 and June 30, 2025 to treat hours worked above 40 in any given week as exempt from Alabama state income tax.

NOTE - Since this exemption is based on 40-hour work weeks, we restricted this new functionality to Pay Groups with Weekly or Bi-Weekly pay frequencies.

Note that Alabama has a unique way of defining the exempt overtime wages, here is a link to their website:

Overtime Exemption - Alabama Department of Revenue

Here is a key snippet:

Here is another snippet from the website related to reporting:

 

The following Golden query will prompt for a date range (begin_chk_date and end_chk_date) and return the two required values for the date range.

SELECT OU_ID,
COUNT(*) EMP_COUNT,
COALESCE(SUM(EXEMPT_EARN), 0) EXEMPT_EARN
FROM (SELECT PCH.OU_ID,
PCH.EMP_ID,
COALESCE(SUM(PCSTH.EXEMPT_EARN), 0) EXEMPT_EARN
FROM PR_CHK_ST_TAX_HIST PCSTH
JOIN PR_CHK_HIST PCH ON PCH.PR_CHK_SA_NUM =
PCSTH.PR_CHK_SA_NUM
WHERE PCSTH.TAX_TYPE_CD = 'SIT'
AND PCSTH.ST_CD IN
(SELECT ST_CD
FROM STATE
WHERE PAR_ST_CD = 'AL')
AND PCH.CHK_DATE BETWEEN '&begin_chk_date' and '&end_chk_date'
GROUP BY PCH.OU_ID,PCH.EMP_ID
HAVING COALESCE(SUM(PCSTH.EXEMPT_EARN), 0) > 0.00)
GROUP BY OU_ID
ORDER BY OU_ID;

The following Golden query shows the exempt earnings by Employee ID.

SELECT PCH.OU_ID,
PCH.EMP_ID,
COALESCE(SUM(PCSTH.EXEMPT_EARN), 0) EXEMPT_EARN
FROM PR_CHK_ST_TAX_HIST PCSTH
JOIN PR_CHK_HIST PCH ON PCH.PR_CHK_SA_NUM =
PCSTH.PR_CHK_SA_NUM
WHERE PCSTH.TAX_TYPE_CD = 'SIT'
AND PCSTH.ST_CD IN
(SELECT ST_CD
FROM STATE
WHERE PAR_ST_CD = 'AL')
AND PCH.CHK_DATE BETWEEN '&begin_chk_date' and '&end_chk_date'
GROUP BY PCH.OU_ID,PCH.EMP_ID
HAVING COALESCE(SUM(PCSTH.EXEMPT_EARN), 0) > 0.00
ORDER BY PCH.OU_ID,PCH.EMP_ID;

Here is another snippet from the website related to W-2 reporting:

This W-2 Box 14 change will be part of the 2024 EOY Tax Kit.