What payroll deductions are employers required to withhold?

Payroll Deductions Required for Employers in Alabama

In Alabama, employers must withhold specific payroll taxes and deductions from employee wages to comply with federal and state regulations. Proper withholding ensures accurate payroll processing and compliance with tax authorities.

Mandatory Payroll Deductions

• Federal Income Tax: Employers must withhold federal income tax based on employee W-4 forms and IRS tax tables.
• Social Security Tax: Withhold 6.2% of wages up to the annual wage base limit, matching this amount as the employer.
• Medicare Tax: Withhold 1.45% of all wages, with the employer matching this amount. Additional Medicare tax withholding applies on wages over $200,000.
• Alabama State Income Tax: Employers are required to withhold Alabama state income tax according to the employee’s Form A-4 and Alabama Department of Revenue withholding tables.
• Unemployment Insurance Taxes: While not withheld from employee wages, employers must pay Alabama unemployment insurance taxes separately.

Additional Considerations

• Voluntary Deductions: Employers may also withhold voluntary deductions such as health insurance premiums, retirement contributions, or wage garnishments, but these are not mandatory.
• Recordkeeping and Reporting: Maintain accurate payroll records of all withholdings and submit payroll tax reports timely to the IRS and Alabama Department of Revenue.
• Payroll Automation: Using payroll software can help ensure correct calculation and timely remittance of required payroll taxes.

As of 2026, employers in Alabama should regularly review payroll tax tables and withholding requirements to stay compliant with any updates from federal or state tax authorities.