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Heather Wylie

Alabama State Income Tax - Overtime Wage Exemption formula

Posted By

We have clients that have multiple pay types.  The current formula provided in the year end update is only useful if your employees have Regular and Overtime pay types.  However, many of our clients have multiple regular and overtime pay types, for example - if they work in another department - the pay type may be labeled as Reg - Dept#1 and OT-Dept#1 or OutofTown OT and OutofTown Regular.  Has anyone found a formula that will accomodate numerous paytype fields besides just Regular and Overtime?  

Thanks

  • 0

    I spoke with Sage Tech Support today, as I was also having this issue. I was basically told that the patch, which is the formula in the Resource you're speaking of, was only made with the two basic pay types in mind. I was told that another tax update will be going out in January that will hopefully include, at the minimum, formulas to include all pay types. 

    For the time being, he said to just enter the pay with the overtime, take note of the ALSIT amount without overtime added, and manually subtract it out of the withholding. 

    This has been extremely frustrating and you are not alone! I hope this helps!

  • 0

    Summary

    Beginning January 1, 2024 overtime wages will be exempt from Alabama State Income Tax.

    Description

    Follow the instructions below to properly configure Sage 50 US in order to hold overtime wages exempt from Alabama State Income Tax.

    Resolution

    At this time, the instructions for this article assume that you have configured your Payroll with the default setup, meaning that for hourly employees, the two pay types for which wages are set are labeled Regular and Overtime. Secondly, that you have installed the 1st January 2024 Payroll Tax Update.

    Note: When the 2nd January Payroll Tax Update is released in January 2024, there will be additional and revised steps to properly calculate the liability for Alabama State Income Taxes for those that have employees with Overtime wages in their payrolls.

    To configure formulas for Overtime employees, follow the steps:

    1. From the File menu, select Payroll Formulas > Sage Maintained.
    2. From the list of payroll formulas, select one of the Alabama State Income Tax formulas labeled ALSIT 24 that contain one of the Filing Statuses that are applicable to one of the employees in your payroll that have Overtime. In other words, each ALSIT 24 formula will need to be updated only if there is an Hourly worker expected to accrue Overtime hours in payroll period beginning in 2024.
    3. Replace the A = variable with the following:
       A = IF(EMP_PAY_STATUS=1, ANNUALIZE(Regular*EMP_SPECIAL4_NUMBER), ANNUAL(ADJUSTED_GROSS));
    4. Click the Save button.
    5. If there are additional Filing Statuses that impact other Overtime employees, repeat and apply the same steps 2-4. After completing the updates for all impacted Filing Statuses, close the window.
    6. From the Maintain window, select Employees/Sales Reps.
    7. Select the first Employee record that includes an hourly Overtime rate defined and click the Pay Info tab.
    8. Take note of the Regular rate defined for the employee and click the Withholding Info tab.
    9. Enter the Regular rate as it was noted from step 8 in the Special 4 row in the Addl Withholding field.
    10. Click the Save button and repeat steps 7-9 for additional employee records that are categorized as Hourly workers and expected to take Overtime in payroll periods for 2024. 

*Community Hub is the new name for Sage City