Employment Tax

United States I Alabama overtime pay exemption guidance for tax year 2024 W-2 reporting

Summary

This is a summary of the changes Alabama has made to the reporting of overtime pay for tax year 2024 as well as a summary of retroactive guidance.

The detail

Alabama

The state’s original overtime pay exemption was governed by Overtime Exemption Act 2023-421 which covers the period January 1, 2024, through June 30, 2025. The original overtime exemption terminated September 30, 2024, as amended by Act 2024-437, which covers the period October 1, 2024- June 30, 2025.

Under the original Overtime Exemption Act 2023-421, overtime pay that qualifies as exempt is defined as:

• Overtime pay received beginning on or after January 1, 2024, and before June 30, 2025.
• Overtime pay based on the act is amounts received by a full-time hourly wage paid employee as compensation for work performed in excess of 40 hours in a week, regardless of the rate paid for the hours over 40 in a week or how it is calculated.

For the tax period beginning on or after October 1, 2024, pursuant to the Overtime Pay Exemption Act 2024-437, overtime pay that qualifies as exempt is defined as:

• Amounts exempt from gross income will be overtime wages computed in accordance with the U.S. Fair Labor Standards Act. The effective date of this change will be October 1, 2024.

Employers can, but are not required to, adjust retroactively for employees beginning January 1, 2024. Employers will do this by sending the Alabama Department of Revenue an email with the overtime wages to be reported for the year and by filing period. The state will then update the overtime on the quarter returns to balance with the Form W-2’s when received.

The employer is not required to amend the Alabama impacted returns for the tax unless the employer wants to refund the over withheld tax to the employee. If the employer does not make the corrections, they should ensure that the correct wages are reported in Box 14 and 16 of Form W-2. The employee can then claim a refund when filing their individual income tax return for over withheld tax due to exempt overtime wages. The state guidance indicated that it may be easier to let employees get a refund when they file their personal tax return for 2024.

How we can help

Vialto can assist you in complying with your responsibilities related to the Alabama overtime pay withholding requirements for tax year 2024 including drafting employee communications and assisting with wage reporting.
Please reach out directly to your Vialto contact or one of the individuals listed below to discuss.

Contact us

For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:

Tina Schrob
Partner

Gregory Fetter
Partner

Want to know when a Regional Alert is posted?

Simply follow our Vialto Alerts page on LinkedIn and posts will be displayed on your feed. To ensure you don’t miss one, once you’re on our LinkedIn page, click on the bell icon under the banner image to manage your notifications.

Further information on Vialto Partners can be found here: www.vialtopartners.com

Vialto Partners (“Vialto”) refers to wholly owned subsidiaries of CD&R Galaxy UK OpCo Limited as well as the other members of the Vialto Partners global network. The information contained in this document is for general guidance on matters of interest only. Vialto is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. In no event will Vialto, its related entities, or the agents or employees thereof be liable to you or anyone else for any decision made or action taken in reliance on the information in this document or for any consequential, special or similar damages, even if advised of the possibility of such damages.

© 2025 Vialto Partners. All rights reserved.