How to set up Alabama State Income Tax (ALSIT) overtime reporting

Beginning January 1, 2024, overtime wages will be exempt from Alabama State Income Tax. This article shows how to set up ALSIT overtime reporting in Sage 50 Accounting.

Currently, the instructions for this article assume you’ve configured your Payroll with the default setup. This means that for hourly employees, the two pay types for which wages exist are Regular and Overtime. It also assumes you’ve installed the 2nd January 2024 Payroll Tax Update.  These changes are only applicable to those employees who will work overtime hours.

There are five new formulas for use with Alabama state income tax, one for each state filing status.  These formulas are:

• ALSOT A4 - Special A filing status
• ALSOT H4 - Head / Household filing status
• ALSOT M4 - Married filing status
• ALSOT S4 - Single filing status
• ALSOTMS4 - Married filing separate status

The formula selected in the employee's record corresponds to their state filing status.

The name of the tax field has changed from ALSIT 24 to ALSITT 24. Update this in the payroll defaults.

 

 

1. Set up employees

Set up defaults for employees who live in the state of Alabama

If all your employees reside in the state of Alabama follow the instructions below to set your default company settings.

• Select Maintain, Default Information, Employees from the main navigation toolbar.
• Click the Employee Fields tab, locate the state income tax field (field name St_Income by default).
• Click the Formula field and select ALSITT from the drop-down menu.
• Click the Adjust button in the state income tax line. Ensure that the Use column is checked on the Gross field line. 
• Click OK to close the Window, and OK once more to close the employee defaults window.
• Select Maintain, Employees / Sales Reps from the main navigation toolbar.
• Select the Employee ID of the desired employee and click the Withholding Info tab.
• In the Special 4 Addl Withholding field, enter the regular pay rate (this amount will correspond with the Regular pay type field on the Pay Info tab).  Save the changes to the employee record.
• Repeat this process for each employee record.

Employees who don’t reside in the state of Alabama will need to have modifications made to their employee records to avoid payroll errors.  Follow the steps below:

Set up employees who don't reside in the state of Alabama

• Select Maintain, Employees / Sales Reps from the main navigation toolbar.
• Select the Employee ID of the desired employee and click the Employee Fields tab.
• Uncheck the Use Defaults checkbox on the state income tax line.  In the Formula field, type in **SIT.
• Click the Adjust button on the state income tax line and ensure that the Use column is checked on the Gross field line.
• Save the changes to the employee record.

 

 NOTE: If you’re required to report AL-exempt overtime wages in Box 14 of the W-2, you must insert the column into the W-2/1099 Preparer grid and enter these amounts manually into the column. See section 2 of How do I add items to the W-2 including Box 12 and Box 14?   

 

2. (Only if you have more than one Regular wage rate) Copy the ALSITT formula from Sage-Maintained Payroll Formulas to User-Maintained

• Go to File > Payroll Formulas > Sage-Maintained.
• Select the ALSITT formula from the drop-down. Make a note of the Formula ID and Name.
• Click the Set Up Tax Brackets button at the bottom.
• Write down all of the taxable income is over, Withhold, and Plus % values. Then click Cancel.
• Click in the Formula field and press Ctrl+A on the keyboard to select the entire formula. Press Ctrl+C to copy.
• Close the formula and then go to File > Payroll Formulas > User-Maintained.
• In the Formula ID and Name fields, enter the same Formula ID and Name as they were in Sage-Maintained formulas.
• Click in the Formula field and press Ctrl+V to paste the copied formula.
• Click the Set Up Tax Brackets button. Enter all the values that existed as they were in the Sage-maintained formula and click OK.
• Click Save to save the formula. Repeat the steps for any ALSITT formula filing statuses as needed.

 

  NOTE: If there’s more than one regular wage rate the EMP_SPECIAL5_NUMBER field can be used to include a second regular wage rate. See the example below:  

 

A = IF(EMP_PAY_STATUS=1, ANNUALIZE((Regular*EMP_SPECIAL4_NUMBER)+(Regular2*EMP_SPECIAL5_NUMBER)), ANNUAL(ADJUSTED_GROSS));

 

The pay types "Regular" and "Regular2" are, for example purposes only, and must be changed to the corresponding pay type name.  Also, specify the 2nd regular wage rate in the EMP_SPECIAL5_NUMBER field in the withholding info tab of the employee record.

 

If there are 3 or more regular wage rates, they can be included in the annualization. However, the amount must be specified in the formula, which can only be applied if the rate is consistent among all employees.  Ex:

A = IF(EMP_PAY_STATUS=1, ANNUALIZE((Regular*12.00)+(Regular2*15.00)+(Regular3*21.50)+(Regular4*25.00)), ANNUAL(ADJUSTED_GROSS));

 

In the above example, there are 4 regular pay types at rates coded to the formula (12.00/15.00/21.50/25.00). As such, the formula will only work properly if all employees use these rates for each of these pay types.  Manually update any changes to the rates in the formula and apply to all employees.