Marilyn has a biweekly gross pay of [tex]$\$[/tex]810[tex]$ and claims 3 federal withholding allowances. Marilyn has the following deductions from her gross pay:

1. Federal tax from the table below:
\begin{tabular}{|c|c|c|c|c|c|c|c|c|c|c|c|c|}
\hline \multicolumn{2}{|c|}{ If the wages are - } & \multicolumn{11}{|c|}{ And the number of withholding allowances claimed is - } \\
\hline \multirow{2}{*}{\begin{tabular}{l}
At least
\end{tabular}} & \multirow{2}{*}{\begin{tabular}{l}
But less \\
than
\end{tabular}} & 0 & 1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 & 9 & $[/tex]10+[tex]$ \\
\hline & & \multicolumn{11}{|c|}{ The amount of income tax withheld is - } \\
\hline 720 & 740 & 80 & 62 & 44 & 26 & 14 & 1 & 0 & 0 & 0 & 0 & 0 \\
\hline 740 & 760 & 83 & 65 & 47 & 28 & 16 & 3 & 0 & 0 & 0 & 0 & 0 \\
\hline 760 & 780 & 86 & 68 & 50 & 31 & 18 & 5 & 0 & 0 & 0 & 0 & 0 \\
\hline 780 & 800 & 89 & 71 & 53 & 34 & 20 & 7 & 0 & 0 & 0 & 0 & 0 \\
\hline 800 & 820 & 92 & 74 & 56 & 37 & 22 & 9 & 0 & 0 & 0 & 0 & 0 \\
\hline 820 & 840 & 95 & 77 & 59 & 40 & 24 & 11 & 0 & 0 & 0 & 0 & 0 \\
\hline 840 & 860 & 98 & 80 & 62 & 43 & 26 & 13 & 1 & 0 & 0 & 0 & 0 \\
\hline
\end{tabular}

2. Social Security tax that is $[/tex]6.2\%[tex]$ of her gross pay.
3. Medicare tax that is $[/tex]1.45\%[tex]$ of her gross pay.
4. State tax that is $[/tex]21\%[tex]$ of her federal tax.

Determine how Marilyn's net pay will be affected if she increases her federal withholding allowances from 3 to 4.

A. Her net pay will increase by $[/tex]\[tex]$15.00$[/tex].
B. Her net pay will decrease by [tex]$\$[/tex]15.00[tex]$.
C. Her net pay will increase by $[/tex]\[tex]$18.15$[/tex].
D. Her net pay will decrease by [tex]$\$[/tex]18.15$.



Answer :

First, let's determine Marilyn's current deductions and net pay with 3 federal withholding allowances.

### Step-by-Step Calculation

1. Gross Pay
[tex]\[ \text{Gross Pay} = \$810 \][/tex]

2. Federal Tax for 3 Withholding Allowances

Using the wage range for \[tex]$810, which falls in \(800 \leq \text{Gross Pay} < 820\): For 3 allowances: \[ \text{Federal Tax (3 allowances)} = \$[/tex]37 \]

3. Social Security Tax

Social Security tax rate is [tex]\(6.2\%\)[/tex]:
[tex]\[ \text{Social Security Tax} = 810 \times 0.062 = \$50.22 \][/tex]

4. Medicare Tax

Medicare tax rate is [tex]\(1.45\%\)[/tex]:
[tex]\[ \text{Medicare Tax} = 810 \times 0.0145 = \$11.745 \][/tex]

5. State Tax

State tax rate is [tex]\(21\%\)[/tex] of the federal tax:
[tex]\[ \text{State Tax (3 allowances)} = 37 \times 0.21 = \$7.77 \][/tex]

6. Total Deductions with 3 Allowances

[tex]\[ \text{Total Deductions (3 allowances)} = 37 + 50.22 + 11.745 + 7.77 = \$106.735 \][/tex]

7. Net Pay with 3 Allowances

[tex]\[ \text{Net Pay (3 allowances)} = 810 - 106.735 = \$703.265 \][/tex]

Next, let's determine the deductions and net pay if Marilyn increases her federal withholding allowances from 3 to 4.

8. Federal Tax for 4 Withholding Allowances

Using the same wage range [tex]\(800 \leq \text{Gross Pay} < 820\)[/tex]:

For 4 allowances:
[tex]\[ \text{Federal Tax (4 allowances)} = \$22 \][/tex]

9. State Tax with 4 Allowances

[tex]\[ \text{State Tax (4 allowances)} = 22 \times 0.21 = \$4.62 \][/tex]

10. Total Deductions with 4 Allowances

[tex]\[ \text{Total Deductions (4 allowances)} = 22 + 50.22 + 11.745 + 4.62 = \$88.585 \][/tex]

11. Net Pay with 4 Allowances

[tex]\[ \text{Net Pay (4 allowances)} = 810 - 88.585 = \$721.415 \][/tex]

12. Net Pay Difference

[tex]\[ \text{Net Pay Difference} = 721.415 - 703.265 = \$18.15 \][/tex]

### Conclusion

Marilyn's net pay will increase by [tex]\(\$18.15\)[/tex] if she increases her federal withholding allowances from 3 to 4.

The correct answer is:

[tex]\[ \text{c. Her net pay will increase by } \$18.15. \][/tex]