Alabama Administrative Code › Title 810 - ALABAMA DEPARTMENT OF REVENUE › Chapter 810-3-71 - WITHHOLDING TAX › Section 810-3-71-.02 - Computing Tax Withheld

Current through Register Vol. 42, No. 9, June 28, 2024
(1)
			 Employers may elect to compute the amount of Alabama income tax to be withheld
			 from the wages of employees in one of two ways.
(a) The withholding tax may be computed using
			 the withholding tax tables, which are available on the Department's website.
			 The tables show amounts to be withheld for weekly, biweekly, semimonthly,
			 monthly, and quarterly payroll periods.
(b) Alabama withholding tax may also be
			 computed using the following formula, based on information provided by the
			 employee on the Alabama Form A-4, Employee's Withholding Exemption Certificate:
1. The employee will select a withholding
			 exemption, and indicate the selected exemption on the Form A-4.
(i) A withholding exemption of "0" indicates
			 that no personal exemption is selected.
(ii) A withholding exemption of "S" indicates
			 that a full personal exemption is selected.
(iii) A withholding exemption of "M"
			 indicates that personal exemptions for both spouses are being
			 selected.
(iv) A withholding
			 exemption of "H" indicates that the employee is single, has one or more
			 qualifying dependents and is claiming head of family. This has the same value
			 as does the "M" exemption.
(v) A
			 withholding exemption of "MS" indicates that the employee is married, but
			 filing a separate return. This has the same value as does the "S"
			 exemption.
2. Compute
			 the Employee's Gross Income or GI. Multiply the employee's gross wages for the
			 current payroll period by the number of such payroll periods in the
			 year.
3. Compute the Standard
			 Deduction. Employers may round GI to the nearest dollar in determining the
			 standard deduction. A Standard Deduction chart is also provided in the
			 withholding tax tables available online.
(i)
			 Employee claims "0" or "Single (S)" exemption:
(I) GI of $20,499 or less deduct
			 $2,500;
(II) GI greater than
			 $20,499 but less than $30,000 deduct $2,500 less $25 for each $500 increment or
			 part thereof of GI above $20,499; or
(III) GI of $30,000 or more deduct
			 $2,000.
(ii) Employee
			 claims "Married Filing Separately (MS)" exemption:
(I) GI of $10,249 or less deduct
			 $3,750;
(II) GI greater than
			 $10,249 but less than $15,000 deduct $3,750 less $88 for each $250 increment or
			 part thereof of GI above $10,249; or
(III) GI of $15,000 or more deduct
			 $2,000.
(iii) Employee
			 claims "Married Filing Jointly (M)" exemption:
(I) GI of $20,499 or less deduct
			 $7,500;
(II) GI greater than
			 $20,499 but less than $30,000 deduct $7,500 less $175 for each $500 increment
			 or part thereof of GI above $20,499; or
(III) GI of $30,000 or more deduct
			 $4,000.
(iv) Employee
			 claims "Head of Family (H)" exemption:
(I) GI
			 of $20,499 or less deduct $4,700;
(II) GI greater than $20,499 but less than
			 $30,000 deduct $4,700 less $135 for each $500 increment or part thereof of GI
			 above $20,499; or
(III) GI of
			 $30,000 or more deduct $2,000.
4. Compute the Federal Withholding Tax.
			 Multiply the employee's actual federal withholding tax for the payroll period
			 by the number of such payroll periods in the year.
5. Determine the Personal Exemption. If the
			 employee claims the "0" withholding exemption, the personal exemption is zero.
			 If the employee claims the "S" or the "MS" withholding exemption, the personal
			 exemption is $1,500. If the employee claims the "M" or the "H" withholding
			 exemption, the personal exemption is $3,000.
6. Compute the Dependency Exemption: Multiply
			 number of dependents other than spouse by the following:
(i) $1,000 if GI less than or equal to
			 $20,000;
(ii) $500 if GI greater
			 than $20,000 but less than or equal to $100,000; or
(iii) $300 if GI greater than
			 $100,000.
7. Add the
			 amounts determined in subparagraphs 3 through 6, above.
8. Compute the taxable amount by subtracting
			 the amount determined in subparagraph 7 from the amount determined in
			 subparagraph 2.
9. Compute the tax
			 for the taxable amount computed in subparagraph 8, as follows:
(i) If the employee is claiming the "0", "S",
			 "H" or "MS" withholding exemption, the tax will be equal to the sum of:
(I) 2% of the first $500,
(II) 4% of the next $2,500, and
(III) 5% of the amount over $3,000.
(ii) If the employee is claiming
			 the "M" withholding exemption, the tax will be equal to the sum of:
(1) 2% of the first $1,000,
(II) 4% of the next $5,000, and
(III) 5% of the amount over $6,000.
10. Compute
			 the Alabama withholding tax by dividing the amount determined in subparagraph
			 9, above, by the number of such payroll periods in the year.
(c) The withholding tax to be
			 remitted to the Department may be rounded to the nearest dollar.