Accounting Fundamentals Certification (AFC) Practice Test

Changing withholdings to minimize his tax refund is a sound recommendation for George. When an individual adjusts their withholdings to minimize their tax refund, they are essentially allowing more of their paycheck to be available to cover monthly expenses instead of overpaying taxes throughout the year. By increasing the number of allowances on their W-4 form, George could receive more take-home pay, which can help him manage his bills and reduce the need to dip into savings.

This approach fosters better cash flow management since it aligns the amount of tax withheld with his actual tax liability, rather than waiting for a lump-sum refund. It’s important for individuals to carefully calculate the appropriate withholdings to avoid underpaying taxes, which could lead to owing money at tax time.

In contrast, other options may not provide a sustainable solution for George's financial situation. Adjusting withholdings to maximize a tax refund might provide a temporary influx of cash once a year but wouldn’t address his ongoing monthly needs. Refund anticipation loans typically come with high fees and interest rates, putting more financial strain on him. Working under the table can lead to legal issues and missed opportunities for benefits like Social Security and unemployment, which would not help in the long run.