Tax Return Problem

Prepare the 2019 Form 1040 and all other required Federal forms and schedules for John Post. The returns should be prepared to take the maximum tax benefit allowable into consideration. Round all amounts to whole dollars.

John Post, age 45, is single and resides at 123 Main Street, West Haven, CT 06516. His social security number is 123-45-6788. John has two children, Alec (age 17) and Grace (age 8), and their social security #s are 049-52-5472 and 045-23-5432 respectively. Johns mother, Donna Post (age 70, social security #048-68-5874) lives at 50 Benton Street, West Haven, CT. Donna receives Social Security income of $11,000 per year and $9,000 in part-time wages. John pays ABC Afterschool Care (EIN: 01-123456) $100 per week to watch Grace after school (40 weeks). John does not want to designate $3 to the Presidential Election Campaign fund.

On July 4, 2018, Johns wife Susan, unexpectedly passed away from an undiagnosed medical condition. John was the named beneficiary of Susans $100,000 life insurance policy. John was given the option by Liberty Mutual to either receive the entire proceeds as one payment in 2018 or to receive $22,000 per year for five years. John chose to receive the proceeds in installments, the second of which was received in February, 2019.

Due to the loss of his wife, John decided that he should work from home. In December of 2018, he retired from his job as a Waterbury police officer and started his own security company on January 1, 2019. He continued to work part-time for the Police Department in 2019. His W-2 from the Waterbury Police Department (EIN 06-1234567) reported the following: wages $18,000, federal income taxes withheld $4,500, and Connecticut income taxes withheld $2,000. WPD withheld the proper amounts of social security and medicare taxes from Johns pay during the year. John was not a participant in WPDs retirement plan.

Johns business Safe & Secure (taxpayer I.D. #06-7654321) opened for business on January 1st. He uses the cash method of accounting and materially participates in the operation of this business. Johns business qualifies for the Qualified Business Deduction. John uses his finished basement as his office. It has a separate entrance for clients and occupies approximately 600 of the 3,000 total square footage of his home. The home cost $300,000 at acquisition (1/1/2015 and does not include cost of land). John rents all necessary office furniture and equipment however repairs to the walls and painting were required to make it client ready. The total cost for the wall repairs and painting was $3,000.

Revenue and expenses for Safe & Secure for the year were as follows:

Security services Revenue	$80,000
Alarm monitoring services Revenue	$15,000
Equipment rent expense	$10,000

Business insurance expense	$1,900
Advertising expense	$800
Legal expenses	$300
Wages paid to his employee	$13,000
Payroll taxes paid on employee wages	$1,400
Office Supplies Expense	$1,000
Liability Insurance Expense	$300

Jhon received the following interest and dividend income in 2019 (he did not have any interest in a foreign account or trust):

	Interest		Dividends
Webster Bank	$600	UTC Corporation**	$2,000
Waterbury Credit Union	$200	Ace Corporation**	$900
Multistate Municipal Bonds	$300	Walmart**	$500

**Non-Qualified dividends

On November 1, 2010, John invested in Ace Corporation by purchasing 100 shares at $50/share. Concerned about the future of the company, he sold the shares at $10/share on February 1, 2019. John received a Form 1099-B from his investment company that reported the sale and basis of the stock sold.

Prior to meeting Susan, John was married to Elaine, (social security #321-54-6789). Pursuant to their divorce agreement in 2010, John is required to make monthly alimony payments of $700 to Elaine. John faithfully makes each months payment.

Alec graduated high school in June and decided to study chemistry at a state university. He received an academic scholarship of $10,000 towards his first year tuition expenses of $18,000. In addition, he took a student loan for $3,000 to pay for room and board. John paid the balance of Alecs tuition costs from Johns savings account.

John paid (and can substantiate) the following during the year:

Health insurance premiums for John and kids (paid during 2019)	$6,800
Interest on personal credit card	$500
Dental expenses (Graces braces)	$2,000
Mortgage interest (Main St) (Total mortgage < 1,000,000)	$6,000
Real estate taxes (Main St)	$3,000
Mortgage interest (Donnas home)	$1,000
Property taxes (assessed on cars value)	$300
Utilities for residence	$5,000
Homeowners insurance	$900
Contributions to church	$400
Used furniture donated to Goodwill (FMV) (Cost = 1,000)	$800
Cost of one dinner ticket to attend a fundraiser for the Republican National Committee; value of a comparable dinner = $50	$475

John did not keep mileage records for medical or charitable contribution deduction purposes.

In 2019, John paid a balance of $200 with his 2018 Connecticut income tax return. He also made state estimated tax payments totaling $1,600 ($400 on each of the following dates 4/15/19, 06/15/19, 09/15/19 and 01/15/20).

In 2019, John made federal estimated tax payments totaling $6,000 ($1,500 on each of the following dates 4/15/19, 06/15/19, 09/15/19 and 01/15/20).

In the event he is due a refund of tax, John would like to apply all of his overpayment to his 2020 tax liability.