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Employer's Payroll Tax & Filing Requirements for the State of Alabama (AL)
Managing payroll in Alabama involves adhering to state-specific requirements for income tax and unemployment insurance. While Alabama follows the federal minimum wage, employers must navigate a progressive state income tax system. This guide covers the essential payroll requirements to ensure your business remains compliant.
Applicable Alabama Payroll Taxes
In Alabama, employers are responsible for a few key state and federal payroll taxes. Here’s a quick overview of the taxes in Alabama.
-
State Income Tax: Alabama has a progressive income tax rate ranging from 2% to 5%, withheld based on employee
W-4/AL-4 forms. -
State Unemployment Tax (SUI): Employers pay state unemployment insurance to fund benefits for eligible
unemployed workers. - Federal Taxes: Employers must withhold and pay Federal Income Tax, Social Security, Medicare (FICA), and Federal Unemployment Tax (FUTA).
Understanding these obligations is essential to maintain compliance and avoid penalties.
Register for AL state income tax and unemployment tax
Alabama tax agencies:
- Alabama Department of Revenue (ADOR) – State income tax withholding.
- Alabama Department of Labor, Unemployment Insurance Division – State unemployment insurance (SUI) tax.
To report and pay state income tax withholding in Alabama, employers must register with ADOR, and to pay state unemployment tax, employers must register with the Alabama Department of Labor (ADOL).
Steps to Register with the Alabama Department of Revenue (ADOR)
1. Register Online
- Step 1: Create a general tax account.
- Step 2: Register with the Alabama Department of Revenue.
- Step 3: In the ‘Businesses’ section, click Register a business or Obtain a New Tax Account Number.
- Step 4: Complete all the steps with the agency to create a general tax account.
After successfully opening your general tax account. Here’s how you must register to get your withholding tax
account number.
2. Register for a withholding tax account number
- Step 1: Visit My Alabama Taxes help page for instructions on how to register for tax types.
- Step 2: Navigate to the My Alabama Taxes (MAT) page.
- Step 3: In the ‘Businesses’ section, click Register a business or Obtain a New Tax Account Number.
- Step 4: Ensure to read the instructions given before you begin.
-
Step 5: You enter your company ID and select that you’re an existing taxpayer and complete the
remaining prompts. - Step 6: You’ll receive your Withholding account number within 3-5 days.
After successful registration, you will receive an Alabama Withholding Tax Account Number. You can use this number to file state withholding forms like Form A-6, Form A-1, W-2, and Form A-3.
Steps to Register with the Alabama Department of Labor, Unemployment Insurance Division
Register via Online:
- Step 1: Visit the Alabama Department of Labor (ADOL).
-
Step 2: Make sure you have the following information to get started with registration.
- FEIN
- Date Alabama Operation Began
- Date of FUTA liability
- Quarterly wages paid in AL
- Number of Employees
- Name, Title, SSN
After successful registration, you will receive an Unemployment Compensation (UC) Account Number to file and pay your SUI taxes.
Steps to Register for Local Taxes (Alabama)
Register for Local Taxes
Generally, Alabama has local taxes. If you owe taxes in any of the following counties, you will need to register with the Alabama Avenu Insights/Revenue Discovery Systems (RDS).
- Attalla
- Beaverton
- Birmingham
- Fort Deposit
- Guin
- Haleyville
- Hamilton
- Leeds
- Macon (county)
- Midfield
- Mosses
- Notasulga
- Shorter
- Southside
- Sulligent
- Tarrant
- Tuskegee
Register Online:
- Step 1: Visit the Alabama Avenu Insights/Revenue Discovery Systems (RDS).
- Step 2: Request an ‘Authority Account Number’ to register for local taxes.
Alabama New Hire Reporting
Alabama employers are required by federal and state law to report all newly hired and rehired employees to the state’s New Hire Reporting Center. This helps enforce child support orders and prevent unemployment and workers’ compensation fraud.
Who needs to report?
All Alabama employers (including government agencies, nonprofits, and household employers) must report:
- New hires: Any employee who completes a W-4 and will be paid wages.
- Rehires employees: Former employees returning after a break of 60 consecutive days or more.
What information must be reported?
Employers of Alabama must report the newly hired and rehired employees. Here is the information required to report newly hired employees to the Alabama New Hire Reporting Center.
Employer information:
- Name
- Address
- Federal Employer Identification Number (FEIN)
Employee information:
- Full name
- Address
- Social Security Number (SSN)
- Date of hire
- Date of birth (optional but recommended)
How to report new hires in Alabama?
To report newly hired employees, follow the steps given below.
1. Online (Preferred)
- Website: Alabama New Hire Reporting Center.
- Create an account or log in.
- Enter the required employer and employee details.
- Submit electronically — confirmation is provided immediately.
2. Mail
Download and complete the Alabama New Hire Reporting Form from the state website and Mail to:
Alabama New Hire Reporting Center
P.O. Box 830912
Birmingham, AL 35283
3. Fax
You can also fax the completed New Hire Reporting form to (888) 252-5805.
What are the penalties for not filing a New hire report in Alabama?
If an employer in Alabama fails to submit a New Hire report, they may face the following penalties:
- $25 per person for each new hire, rehire, or independent contractor that is not reported, reported late, or reported with incomplete information.
- $500 per person if the failure to report is due to a conspiracy between the employer and the employee or contractor to avoid reporting.
Alabama State Payroll Tax Requirements
Alabama employers must withhold state income tax from employee wages based on the income level of the employee paying the tax. This section outlines the key state tax requirements that every Alabama employer must follow to ensure compliance.
State Income tax
The Alabama state income tax (SIT) rates are progressive, ranging from 2% to 5%. Here’s a breakdown:
- 2% on the first $500 of taxable income (for single filers / separate returns)
- 4% on the next $2,500 (i.e., taxable income between $500 and $3,000)
- 5% on taxable income above $3,000
For married couples filing jointly, the brackets are roughly doubled:
- 2% on first $1,000
- 4% on next $5,000
- 5% on income over $6,000
State Unemployment Tax
State unemployment taxes are state-level payroll taxes that employers pay to fund unemployment benefits for eligible workers who lose their jobs through no fault of their own.
Who is liable?
Alabama employers are liable for SUI taxes if they meet the following conditions:
- Paid $1500 in wages during a calendar quarter or;
-
Had at least one Alabama employee working for any part of the week, for 20 or more different weeks during a
calendar year.
Alabama State Unemployment Tax Rate
Employers in Alabama must pay State Unemployment Insurance (SUI) taxes to support the state’s unemployment benefit program. The following table outlines the applicable SUI tax rates in Alabama:
| Alabama State Unemployment Tax Rate | |
|---|---|
| Taxable Wage Base | $8,000 |
| Tax Rate Range | 0.20% - 5.40% |
| New Employer Rate | 2.70% |
Alabama Minimum Wage Requirements
Alabama follows the same minimum wage as the federal minimum wage. Make sure all the employers meet the current federal minimum wage rate for all employees.
| Wage Type | Alabama Rate (per hour) | Federal Rates (per hour) |
|---|---|---|
| Minimum wage | $7.25 | $7.25 |
| Tipped Minimum Wage | $2.13 | $2.13 |
| Actual Tip Credit | $5.12 | $5.12 |
Overtime Regulations
Alabama follows the federal Fair Labor Standards Act (FLSA) for overtime rules, as the state has no separate overtime law. Non-exempt employees (such as Retail or Restaurant Workers) must be paid 1.5 times their regular rate of pay for any hours worked over 40 in a workweek.
Exemption:
Certain employees are exempt from overtime if they meet both the salary and duties tests under the FLSA. In Alabama, this typically includes:
- Executive employees
- Administrative employees
- Professional employees
To qualify for exemption, these employees must earn at least $684 per week on a salaried basis and perform the specific job functions defined by the FLSA.
Alabama Termination Reports
Employers do not file a special termination notice with the Alabama Department of Labor (ADOL).
Instead, when a former employee files for unemployment, ADOL will send the employer a Request for Separation Information (Form BEN-241).
Alabama State Tax Payments
Alabama State Withholding Payments
Alabama employers are required to withhold state income tax from employees' wages and remit these withholdings to the Alabama Department of Revenue (ADOR).
Quarterly filers – Payments are due by the last day of the month following the end of each calendar quarter:
| Quarter | Filing Deadline |
|---|---|
| Quarter 1 (January - March) | April 30 |
| Quarter 2 (April - June) | July 31 |
| Quarter 3 (July - September) | October 31 |
| Quarter 4 (October - December) | January 31 |
Methods to deposit Alabama State income tax withholding taxes
To deposit your state withholding taxes, you can use various payment methods, which include:
1. Pay via Online:
- Visit the My Alabama Taxes portal to submit your Alabama withholding tax payment.
- Credit or debit card payment: To make a credit card payment in My Alabama Taxes, click on ‘Make a Payment’, select the payment type, and click ‘Pay by Credit Card’.
2. Pay via Mail:
- Check or money order: Complete Form 40V and mail it to the address mentioned in the form.
Alabama State Unemployment Tax Payments
Alabama employers must file Unemployment Tax and Wage Reports Form AL UC-CR4 and make corresponding tax payments to the Alabama Department of Labor, Unemployment Insurance Division, on a quarterly basis. The due dates are as follows:
| Quarter | Filing Deadline |
|---|---|
| Quarter 1 (January - March) | April 30 |
| Quarter 2 (April - June) | July 31 |
| Quarter 3 (July - September) | October 31 |
| Quarter 4 (October - December) | January 31 |
Methods to deposit Alabama State unemployment tax withholding taxes
To deposit your state Unemployment taxes, you can use various payment methods, which include:
- Online (recommended): To pay your unemployment tax payment, Visit the My Alabama Taxes portal to submit your Alabama unemployment tax payment.
Alabama State Tax Filings
Quarterly State Income Tax Filings
Form A-6 (Monthly Withholding Tax Return): Form A-6 is used by employers with an average monthly withholding liability of $1000 or more.
Deadline: Form A-6 is due by the 15th of the following month. If any of the due dates fall on a weekend or holiday, the following business day will be considered the due date.
Form A-1 (Quarterly Withholding Tax Return): Form A-1 is used by employers with an average monthly withholding liability is less than $1000.
Deadline: Quarterly filers – Payments are due by the last day of the month following the end of each calendar quarter:
| Quarter | Filing Deadline |
|---|---|
| Quarter 1 (January - March) | April 30 |
| Quarter 2 (April - June) | July 31 |
| Quarter 3 (July - September) | October 31 |
| Quarter 4 (October - December) | January 31 |
Annual State Income Tax Filings
Form A-3 (Annual Reconciliation of Withholding Tax): Form A-3 is used by Alabama employers to reconcile the total state income tax withheld from employees’ wages during the year with the total payments and withholding returns (Forms A-1 or A-6) previously filed.
Deadline: Form A-3 is due by January 31 of the preceding calendar year.
Quarterly State Unemployment Tax Filings
Form AL UC-CR4 (Quarterly Contribution and wage report): Form AL UC-CR4 is used by employers in Alabama to report unemployment insurance (UI) contributions and employee wage details each quarter.
Deadline: Form UC-CR4 is due by the last day of the month following the quarter.
| Quarter | Filing Deadline |
|---|---|
| Quarter 1 (January - March) | April 30 |
| Quarter 2 (April - June) | July 31 |
| Quarter 3 (July - September) | October 31 |
| Quarter 4 (October - December) | January 31 |
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