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which_chickSo it's tax time! Let's talk taxes!
As you know, Bob, I get income from a variety of sources.
Source 1: the sweat of my brow or the W2 job, which is maintaining apartment buildings, mowing the lawns, shoveling the snow, repainting and patching and re-flooring and such when people move out, unclogging toilets, fixing drippy sinks, troubleshooting furnaces, replacing water heaters, etc. That sort of thing. I made $28160 a year (W2 total wages) doing this. (I'll make a little more for 2022 because I gave myself a buck-an-hour raise due to inflation.)
Source 2: passive income from the s-corps that own the buildings I maintain in Source 1. I made $1608 in pass-through income on the rentals themselves. This is not money I receive, just money I pay taxes on. That doesn't look like much profit because it isn't much profit, by design. See, the apartment buildings all have mortgages and their mortgage payments siphon off a lot of their profit and keep them in, basically, permanent debt. (There is absolutely no requirement anywhere for a mortgage to be amortized or paid off. It is 100% OK to have a mortgage and never make any headway against the principle if your lender is all right with that. This way, the apartment-owning companies look very asset-poor to any lawyers who might want to sue them for #reasons. All of the mortgages for the apartment buildings are held by the vig, see below.)
Source 3: the vig, a company that writes mortgages, both to the apartment-owning companies (source 2, above) and also to other people and companies for (mostly) commercial properties. (There are very strict rules for "homeowner" mortgages but substantially fewer rules for "commercial property" mortgages. Basically, it is a lot easier and more lucrative to do commercial property mortgages.) The vig is a profitable enterprise of which I own approximately 19.5% and this year I made $27,792 from it in income that I have to pay taxes on. Again, do note that this is income that I pay taxes on but it does not represent, like, A CHECK FOR ME. The vig does not own any property at all nor does it have any dealings with the great unwashed public what might could lead to lawsuits. All it does is write mortgages and get payments. The purpose of the vig is to hold liquidity, generate revenue, and maintain very limited exposure. Because of the lawsuit protections that exist for mortgage lenders, the vig is as close to execution-proof as we can make it. ("execution proof" is lawyer talk for "not able to be sued")
Source 4: interest that is NOT in source 3, dividends: This is dividends from stock, interest on contracts of sale for properties we are selling, interest on bank account and brokerage account money. It's mostly dribs and drabs. This year it was $4171 and again, it is not a check for me. It's just "income" that I pay taxes on.
Source 5: section 1231 This is the "profit" part of the sale of a building. (If you bought a building for 100K and sell it for 150K, $50K is the profit. If you also finance the sale and structure the payments so that there's interest on them thar payments, as you certainly should do, that interest goes into Source 4. Source 5 is only the "long term capital gains" part of the sale price.) Most years, this is a trivial thing because most years building-buyers make a little headway on their principle and it's not a big deal. This year, though, F. paid off a building, which we quite honestly did not expect him to ever do. He managed, with the help of skyrocketing property values and continual payments and the distance of ten years time from when he defaulted on like 80K of credit card debt, to find some bank willing to refinance the building and thus pay us off in one fell swoop. Fell, indeed. My cut of the payoff was $32,811 in section 1231 gains. *ouch* That's a deep cut. Again, this is income I pay taxes on, not income I get a check for.
There are a few other trickles of income amounting to another couple of grand, but anyway that's the bulk of it. For 2021, I took home $23,548 (wages less all taxes withheld) + $8870 (My share of the annual cash distribution from the vig. It's slightly less than half of the year's profits and it DOES represent a check for Actual Spendable Dollars that I can use to pay taxes or fritter away or whatever.). That gives us a net Actual Spendable Dollars Income of $32,418. Like, that's what I live on and pay my bills with and so forth.
Usually this is fine. In a typical year, I get about 32K in Actual Spendable Dollars and I pay tax on about 60 or 70K of income, most of the difference there being "pass-through" income from S-corps and Partnerships. Usually I wind up spending about half of the distribution money from the vig on my assorted tax burdens and keep the rest for the aforementioned frittering away purposes. My usual check-to-the-IRS is about 4K and my usual check to the commonwealth is about a grand and I budget for this, every year. It is Not A Problem... Most years.
This year, though... this year Section 1231 is kicking my ass. This year I have 33K (give or take) in unexpected capital gains. FML. This year, I made 32K in Actual Spendable Dollars but I am paying taxes on an Adjusted Gross Income of $95748. This year, the IRS would like $9059 in additional monies from me over and above the withholding from my actual wages... not the typical 4K that they want in most years. I have it, but barely.
I'm kind of afraid to look at the state return because they are going to want more money as well and I don't have more money at the moment. I might be able to have it by April, depending on how much they want. UPDATE: They want 2K. *sigh*
The whole thing is annoying af. It's not a problem in the way that someone not having enough money to pay their rent for February and facing eviction in the dead of winter is a problem but it is annoying. I may have to take a loan out from the vig to be able to pay my shitting taxes, said loan having to be paid back at the going rate. (All money borrowed from the vig is paid back at the GOING RATE OF INTEREST, even if it's borrowed by family. Currently the vig runs at 8%.) I could, alternatively, reduce my basis in the vig in order to pay my taxes but neither of my brothers -- the other 2/3 of the company that got hit with the Section 1231 bomb -- will have to do that reason being that both of them make shittons more money than I do in their Real Jobs (tm) and also I should not have to reduce my basis in the vig in order to pay my fucking taxes. That is NOT DONE. That is a slippery slope of not happening.
Updated again. There are 6 pay periods between now and the taxes having to be paid for realsies. That's an income of $5433 (net) and I only need 2K. This is not going to be a significant problem. It will be annoying in that I can't just buy whatever in the interim, but it won't be A Significant Problem.
As you know, Bob, I get income from a variety of sources.
Source 1: the sweat of my brow or the W2 job, which is maintaining apartment buildings, mowing the lawns, shoveling the snow, repainting and patching and re-flooring and such when people move out, unclogging toilets, fixing drippy sinks, troubleshooting furnaces, replacing water heaters, etc. That sort of thing. I made $28160 a year (W2 total wages) doing this. (I'll make a little more for 2022 because I gave myself a buck-an-hour raise due to inflation.)
Source 2: passive income from the s-corps that own the buildings I maintain in Source 1. I made $1608 in pass-through income on the rentals themselves. This is not money I receive, just money I pay taxes on. That doesn't look like much profit because it isn't much profit, by design. See, the apartment buildings all have mortgages and their mortgage payments siphon off a lot of their profit and keep them in, basically, permanent debt. (There is absolutely no requirement anywhere for a mortgage to be amortized or paid off. It is 100% OK to have a mortgage and never make any headway against the principle if your lender is all right with that. This way, the apartment-owning companies look very asset-poor to any lawyers who might want to sue them for #reasons. All of the mortgages for the apartment buildings are held by the vig, see below.)
Source 3: the vig, a company that writes mortgages, both to the apartment-owning companies (source 2, above) and also to other people and companies for (mostly) commercial properties. (There are very strict rules for "homeowner" mortgages but substantially fewer rules for "commercial property" mortgages. Basically, it is a lot easier and more lucrative to do commercial property mortgages.) The vig is a profitable enterprise of which I own approximately 19.5% and this year I made $27,792 from it in income that I have to pay taxes on. Again, do note that this is income that I pay taxes on but it does not represent, like, A CHECK FOR ME. The vig does not own any property at all nor does it have any dealings with the great unwashed public what might could lead to lawsuits. All it does is write mortgages and get payments. The purpose of the vig is to hold liquidity, generate revenue, and maintain very limited exposure. Because of the lawsuit protections that exist for mortgage lenders, the vig is as close to execution-proof as we can make it. ("execution proof" is lawyer talk for "not able to be sued")
Source 4: interest that is NOT in source 3, dividends: This is dividends from stock, interest on contracts of sale for properties we are selling, interest on bank account and brokerage account money. It's mostly dribs and drabs. This year it was $4171 and again, it is not a check for me. It's just "income" that I pay taxes on.
Source 5: section 1231 This is the "profit" part of the sale of a building. (If you bought a building for 100K and sell it for 150K, $50K is the profit. If you also finance the sale and structure the payments so that there's interest on them thar payments, as you certainly should do, that interest goes into Source 4. Source 5 is only the "long term capital gains" part of the sale price.) Most years, this is a trivial thing because most years building-buyers make a little headway on their principle and it's not a big deal. This year, though, F. paid off a building, which we quite honestly did not expect him to ever do. He managed, with the help of skyrocketing property values and continual payments and the distance of ten years time from when he defaulted on like 80K of credit card debt, to find some bank willing to refinance the building and thus pay us off in one fell swoop. Fell, indeed. My cut of the payoff was $32,811 in section 1231 gains. *ouch* That's a deep cut. Again, this is income I pay taxes on, not income I get a check for.
There are a few other trickles of income amounting to another couple of grand, but anyway that's the bulk of it. For 2021, I took home $23,548 (wages less all taxes withheld) + $8870 (My share of the annual cash distribution from the vig. It's slightly less than half of the year's profits and it DOES represent a check for Actual Spendable Dollars that I can use to pay taxes or fritter away or whatever.). That gives us a net Actual Spendable Dollars Income of $32,418. Like, that's what I live on and pay my bills with and so forth.
Usually this is fine. In a typical year, I get about 32K in Actual Spendable Dollars and I pay tax on about 60 or 70K of income, most of the difference there being "pass-through" income from S-corps and Partnerships. Usually I wind up spending about half of the distribution money from the vig on my assorted tax burdens and keep the rest for the aforementioned frittering away purposes. My usual check-to-the-IRS is about 4K and my usual check to the commonwealth is about a grand and I budget for this, every year. It is Not A Problem... Most years.
This year, though... this year Section 1231 is kicking my ass. This year I have 33K (give or take) in unexpected capital gains. FML. This year, I made 32K in Actual Spendable Dollars but I am paying taxes on an Adjusted Gross Income of $95748. This year, the IRS would like $9059 in additional monies from me over and above the withholding from my actual wages... not the typical 4K that they want in most years. I have it, but barely.
I'm kind of afraid to look at the state return because they are going to want more money as well and I don't have more money at the moment. I might be able to have it by April, depending on how much they want. UPDATE: They want 2K. *sigh*
The whole thing is annoying af. It's not a problem in the way that someone not having enough money to pay their rent for February and facing eviction in the dead of winter is a problem but it is annoying. I may have to take a loan out from the vig to be able to pay my shitting taxes, said loan having to be paid back at the going rate. (All money borrowed from the vig is paid back at the GOING RATE OF INTEREST, even if it's borrowed by family. Currently the vig runs at 8%.) I could, alternatively, reduce my basis in the vig in order to pay my taxes but neither of my brothers -- the other 2/3 of the company that got hit with the Section 1231 bomb -- will have to do that reason being that both of them make shittons more money than I do in their Real Jobs (tm) and also I should not have to reduce my basis in the vig in order to pay my fucking taxes. That is NOT DONE. That is a slippery slope of not happening.
Updated again. There are 6 pay periods between now and the taxes having to be paid for realsies. That's an income of $5433 (net) and I only need 2K. This is not going to be a significant problem. It will be annoying in that I can't just buy whatever in the interim, but it won't be A Significant Problem.
