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Withholding Tax FAQ

Do I need a withholding tax account number?
If you are an employer with employees working in the state of Alabama, you will need to register with the Department of Revenue for a withholding tax account number. If you are an Alabama employer with Alabama residents working outside the state of Alabama, you will need to withhold Alabama income tax on those residents unless you are withholding tax for the state in which the employee is working in. To obtain a withholding tax account number, employers must file the Combined Registration/Application available online. NOTE: Account numbers assigned after April 9, 2007 will consist of 10 alphanumeric characters beginning with an “R.” Please make sure that the payroll software provider or program that you will be using is aware of this change.

What are the W-2 form filing requirements?
Employers and filing agents who submit 25 or more Form W-2s (and/or Form 1099s with Alabama tax withheld) or who have filed and paid electronically during the year must electronically file this information and the Form A-3 online through My Alabama Taxes (MAT) on or before January 31 of the following year.

What are the filing requirements when filing on behalf of an employer or withholding agent.
Accountants and tax filing services who file withholding tax returns and payments on behalf of employers must register with the ADOR as a bulk filer and must utilize their bulk filer registration when filing withholding tax returns on behalf of their clients. View more information concerning Bulk Filing.

My employer is not withholding tax or will not provide me with a W2 form. What should I do?
Contact the Withholding Tax Section at (334) 242-1300 or your local Taxpayer Service Center. Please include the following information: employer’s name, address, phone number and number of employees.

I overpaid my withholding tax, how should I handle this?
Overpayments may be taken as a credit on Line 5 of your next withholding tax return. The return on which a credit is claimed must be accompanied by a brief explanation of where the overpayment occurred in order for the Department to verify the overpayment. If filing electronically, please complete the credit claimed information before submitting your return. If a refund is preferred, Form IT:RE-2WH Application for Refund of Income Tax Withholding can be obtained by submitting a written request to the Department. Original IT:RE-2WH forms are required and photocopies will not be accepted. Refunds generally take anywhere from 10 to 12 weeks.

How do I amend Form W-2?
To amend Form W-2, you must obtain Form W-2C from Internal Revenue Service and submit a copy to the Alabama Department of Revenue. For Alabama withholding tax changes, the W-2C should be submitted with a corrected Form A-3 marked “Amended.” Corrections to items other than Alabama income tax (i.e. wages, social security number, FICA taxes, name corrections, etc.) do not require an amended Form A-3.

I would like to begin filing and paying my withholding taxes electronically, where do I begin?
The Alabama Department of Revenue offers a FREE electronic service, My Alabama Taxes (MAT), for filing and remitting withholding tax. MAT is an online filing system developed to allow taxpayers to file and pay their withholding tax electronically.
If you are unable to access your account via the Internet, please contact the Department at (334) 242-1300. In order to access your account via My Alabama Taxes (MAT), you will need your withholding tax account number and Sign On ID and Access Code provided by the Department to sign up in MAT.

I have an active withholding tax account, but currently don’t have any employees. Do I need to file monthly or quarterly returns?
You will need to file a zero quarterly return in order to avoid receiving a delinquent notice for failure to file. You will not need to file a zero monthly report. If you do not plan on hiring any employees in the near future, you may file Form A-1 and mark the return as Final on line 1 to place your account on inactive status. This will eliminate the need to file the zero returns. You may also inactivate or reactivate the account at a later time by calling the Withholding Tax Section at (334) 242-1300.

How can I check on my individual income tax refund?
If you have questions concerning your individual income tax refund, visit our My Alabama Taxes (MAT) for more information. The Withholding Tax Section does not handle individual income tax.

My check for withholding tax has not cleared my bank, what should I do?
Please view your account online through My Alabama Taxes (MAT) to verify receipt of payment. Since checks take longer to process the Department encourages employers to electronically file and pay. Payments of $750 or more are required to be filed and paid electronically.

We have a Section 125 Cafeteria Plan available to our employees, does the State of Alabama recognize this exclusion from gross income?
The State of Alabama recognizes the following Federal Code Sections: Section 125 Cafeteria Plan, Section 401K, and Section 403B. For information on other exclusion from gross income, please see page 2 of the Withholding Tax Tables and Instructions for Employers.

I have hired a sitter or someone to help in my home, am I required to withhold Alabama income tax from their wages?
Domestic help in the home is exempt from the withholding tax regulations. Also exempt from withholding tax are merchant seaman, duly ordained ministers, and agricultural employees. For more information on these classes of exemption, please see page 1 of the Withholding Tax Tables and Instructions for Employers.

Are any employees exempt from withholding tax?
Yes, the chief classes of exempt employment are domestic services in private homes, merchant seamen, duly ordained ministers performing duties of their ministry, and agricultural employees. Although these wages are exempt from withholding tax requirements, the wages do represent taxable income and should be reported by the employee on their individual income tax return. Employers should provide both the employee and the Department with a copy of Form W2 reflecting the wages earned by the employee for that year. For more information on these classes of exemption, please see page 2 of the  Withholding Tax Tables and Instructions for Employers.

My federal identification number has changed, do I need a new state withholding tax account number?
If your federal identification number changes, you will need to apply for a new state withholding tax account number by filing the Combined Registration/Application available online.

My business entity type (corporation, LLC, proprietorship, partnership, etc.) changed, but my federal employee identification number remained the same. Do I need a new state withholding tax account number?
Yes, if your business entity type changed, you will need to apply for a new state withholding tax account number by filing the Combined Registration/Application.

I am a sole proprietor and have opened another business, do I need another withholding tax account number?
As a sole proprietor you do not need to apply for another withholding tax number for opening another business unless that business is operating under a different federal identification number than the sole proprietor. A sole proprietor will file all his business withholding under one state number.

Why are there 2 penalties on this notice from the Department of Revenue?
One penalty is for the late filing of the withholding tax return and the other penalty is for late payment of the withholding tax. Please see the billing code explanation enclosed with your letter.
How are OTR (over the road) drivers taxed?
Truck drivers that operate in two or more states will fall under the jurisdiction of the Amtrak Reauthorization Act (Public Law 101-322) and will be taxed on their state of residency.

We have employees who will be receiving severance pay. Is this income taxable to the recipient?
Severance pay exemption of up to $25,000.00 is available upon approval from the Department. Please visit  the Severance Pay Exemption page.

How do I change my banking information for electronic filing?
Banking information can be managed through the “My Profile” link in My Alabama Taxes (MAT).

Is withholding required from 1099 Distributions?
No, however, those electing to voluntarily withhold tax must register for a withholding tax account number with the Department and remit the tax withheld. Forms 1099 reflecting Alabama income tax withheld along with Forms W2 must be submitted with the Form A3 Annual Reconciliation on or before January 31 of the following year.