For a more specific answer, you need to provide more details of your situation.
This is the general rule: The income is work state (WS) source income since it was earned there. Resident States (RS) tax all their resident's income, regardless of where earned. You will file a non-resident tax return for the WS and report the WS income. You will file a full year resident return for the RS, reporting all your income. The RS will give you a credit, or partial credit for any tax paid to the WS.
Based on what little info you have provided, your company may be doing it correctly (withholding AL tax because you work there).
Q. Because of this, we've had to owe MS & get a small amount back in refund from AL. How do I fix this?
A. Assuming you're a MS resident, working in AL, it sounds like you failed to claim the credit for AL tax paid, when you filed your MS state return.
