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This article applies to:

  • Product: Accounting CS
  • State: Alabama
  • Subject: Payroll checks,Payroll tax forms

Alabama overtime wages exempt from state income tax

Beginning January 1, 2024, overtime paid to hourly wage employees who worked more than 40 hours in a week are excluded from Alabama gross income and exempt from Alabama state income tax. Visit Alabama's website for more information about the overtime exemption.
We recommend that you set up a new pay item with the new tax treatment using these steps.
  1. Select
    Setup
    , then
    Payroll Items
    .
  2. Add a new pay item for recording Alabama SIT exempt overtime and double time wages.
  3. In the W-2 Additional Information section, mark
    Box 14 - Other
     and enter
    EX OT WAGES
    .
    note
    To report wages correctly on payroll tax forms (including A-1, A-6, and W-2), the
    EX OT WAGES
     text is required.
  4. Go to the Tax Exemptions tab and mark the
    Alabama SIT
     checkbox.
  5. Select
    Enter
     to save your changes.
  6. Select
    Setup
    , then
    Employees
    .
  7. Select the employee, and then go to the Payroll Items tab and mark the
    Active
     checkbox for the new pay item you set up.
    tip
    You can use Edit Multiple Employees to activate this pay item too.
When you enter payroll checks, make sure to record hours subject to Alabama SIT in the regular pay item, and record overtime and double time hours exempted from SIT in the new pay item.

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