Disapproving the action of the District of Columbia Council in approving the DC Income and Franchise Tax Conformity and Revision Temporary Amendment Act of 2025 (HJRes 142) – After passage of the One Big Beautiful Bill Act, the Council of the District of Columbia (DC) opted out of the tax code from the Act, amending several provisions and restoring the DC child tax credit. This resolution nullifies DC’s amended legislation. It was introduced on Jan. 22 by Rep. Brandon Gill (R-TX). It passed in the House on Feb. 4, the Senate on Feb. 12, and was enacted on Feb. 18.
Semiquincentennial Congressional Time Capsule Act (S 3705) – This bill instructs the Architect of the Capitol to bury a time capsule in the Capitol Visitor Center (on or before July 4, 2026) as part of this year’s 250th anniversary celebration of the nation’s founding. The purpose of the capsule is to represent legislative milestones to date via a joint letter to the future Congress by the majority and minority leaders of the Senate and the House. The time capsule is meant to remain there until July 4, 2276, the nation’s 500th anniversary. The legislation was introduced by Sen. Thom Tillis (R-NC) on Jan. 27. It passed the Senate on Jan. 27, the House on Feb. 9, and was signed into law by the president on Feb. 18.
Bankruptcy Administration Improvement Act of 2025 (S 3424) – This Act was introduced by Rep. Christopher Coons (D-DE) on Dec. 10, 2025, and passed in the Senate on the same day. It cleared the House on Jan. 12 and was signed into law on Feb. 6. The bill makes alterations to the administration of bankruptcy cases by increasing fees paid to trustees in Chapter 7 (liquidation) cases, and extends by five years the fees paid to trustees in Chapter 11 (reorganization) cases. It also extends the term of bankruptcy judgeships in various districts, as well as other provisions.
Ending Improper Payments to Deceased People Act (S 269) – This legislation requires the Social Security Administration (SSA) to share its death records with the Treasury Department in order to prevent improper payments to deceased individuals. In the past, this bill had to be extended every three years, but the new bill makes the requirement permanent. The bill was introduced by Sen. John Kennedy (R-TN) on Jan. 28, 2025. It passed unanimously in the Senate on Sept. 19, 2025, cleared the House on Jan. 13, and was enacted on Feb. 10.
Safeguard American Voter Eligibility Act (S 1383) – This controversial voting bill passed in the House on Feb. 11. The Republicans in the Senate have secured 50 votes for passage, but the bill requires 60. The provisions in the current bill include requiring:
Each state is to submit full voter rolls to the Department of Homeland Security (DHS) for verification of citizenship via its SAVE system, which has historically had a high error rate of flagging citizens as non-citizens.
Voter roll purges every 30 days and end the 90-day quiet period that allows voters mistakenly purged time to re-register before Election Day.
New or changing voter registrants to show proof of U.S. citizenship (birth certificate or passport; five states already meet this requirement for a Real ID driver’s license).
Voters to show photo ID at polls in order to vote (38 states already require this)
A ban on automatically mailing ballots to all voters (currently used by eight states and DC); voters would have to send individual requests to receive a mail ballot.
Democrats in the Senate have vowed to block passage via filibuster.
Burying Time Capsules, Ending Payments to Dead People, and Safeguarding Voting Rights for U.S. Citizens
March 1, 2026 · Blog, Congress at Work, Uncategorized
⏱ 3 min read
Disapproving the action of the District of Columbia Council in approving the DC Income and Franchise Tax Conformity and Revision Temporary Amendment Act of 2025 (HJRes 142) – After passage of the One Big Beautiful Bill Act, the Council of the District of Columbia (DC) opted out of the tax code from the Act, amending several provisions and restoring the DC child tax credit. This resolution nullifies DC’s amended legislation. It was introduced on Jan. 22 by Rep. Brandon Gill (R-TX). It passed in the House on Feb. 4, the Senate on Feb. 12, and was enacted on Feb. 18.
Semiquincentennial Congressional Time Capsule Act (S 3705) – This bill instructs the Architect of the Capitol to bury a time capsule in the Capitol Visitor Center (on or before July 4, 2026) as part of this year’s 250th anniversary celebration of the nation’s founding. The purpose of the capsule is to represent legislative milestones to date via a joint letter to the future Congress by the majority and minority leaders of the Senate and the House. The time capsule is meant to remain there until July 4, 2276, the nation’s 500th anniversary. The legislation was introduced by Sen. Thom Tillis (R-NC) on Jan. 27. It passed the Senate on Jan. 27, the House on Feb. 9, and was signed into law by the president on Feb. 18.
Bankruptcy Administration Improvement Act of 2025 (S 3424) – This Act was introduced by Rep. Christopher Coons (D-DE) on Dec. 10, 2025, and passed in the Senate on the same day. It cleared the House on Jan. 12 and was signed into law on Feb. 6. The bill makes alterations to the administration of bankruptcy cases by increasing fees paid to trustees in Chapter 7 (liquidation) cases, and extends by five years the fees paid to trustees in Chapter 11 (reorganization) cases. It also extends the term of bankruptcy judgeships in various districts, as well as other provisions.
Ending Improper Payments to Deceased People Act (S 269) – This legislation requires the Social Security Administration (SSA) to share its death records with the Treasury Department in order to prevent improper payments to deceased individuals. In the past, this bill had to be extended every three years, but the new bill makes the requirement permanent. The bill was introduced by Sen. John Kennedy (R-TN) on Jan. 28, 2025. It passed unanimously in the Senate on Sept. 19, 2025, cleared the House on Jan. 13, and was enacted on Feb. 10.
Safeguard American Voter Eligibility Act (S 1383) – This controversial voting bill passed in the House on Feb. 11. The Republicans in the Senate have secured 50 votes for passage, but the bill requires 60. The provisions in the current bill include requiring:
Each state is to submit full voter rolls to the Department of Homeland Security (DHS) for verification of citizenship via its SAVE system, which has historically had a high error rate of flagging citizens as non-citizens.
Voter roll purges every 30 days and end the 90-day quiet period that allows voters mistakenly purged time to re-register before Election Day.
New or changing voter registrants to show proof of U.S. citizenship (birth certificate or passport; five states already meet this requirement for a Real ID driver’s license).
Voters to show photo ID at polls in order to vote (38 states already require this)
A ban on automatically mailing ballots to all voters (currently used by eight states and DC); voters would have to send individual requests to receive a mail ballot.
Democrats in the Senate have vowed to block passage via filibuster.
Disclaimer
These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact a professional regarding the topics in these articles. The images linked to these articles are protected by copyright and should not be copied for any reason.
Most people approach tax season thinking about one thing: getting their return done. What they rarely think about is what the experience looks like from the other side of the desk. Having seen it from both angles, I can tell you there’s a real difference between clients who make a preparer’s job easy and those who quietly make it harder than it needs to be.
Here’s why that matters to you specifically: being a better client isn’t about being polite for politeness’ sake. It translates directly into lower bills, faster turnarounds, and better advice. This is entirely in your own interest.
First, Understand How You’re Being Charged
The way the preparer bills you should shape how you work with them. There are three common arrangements, and each one rewards organization in a different way.
If you’re on a flat fee, the dollar amount doesn’t change whether your documents are immaculate or a complete mess. But here’s what does change: a preparer who powers through your tidy file in two hours now has time to actually think about your situation. That might mean spotting a deduction you’ve been missing for years or flagging something worth changing before next filing season. Advice like that can easily be worth more than the return preparation itself, but it only happens when there’s time and mental energy left over to give it.
Hourly billing leaves no room for ambiguity. Every follow-up email, every clarifying phone call, every minute your return sits untouched while you track down a missing form, it all runs the meter. Most of that extra cost is entirely preventable with a little upfront effort.
The hybrid model, which is a base fee with overage charges for complexity, is the most common setup you’ll encounter. Most preparers are generous about absorbing minor extra work without comment. But when documents arrive in scattered batches, questions go unanswered for days, and the timeline keeps slipping, that goodwill has a limit. And again, the extra charges that result are almost always avoidable.
There’s one more piece to this that doesn’t show up on any invoice. Tax preparers are human, and like anyone doing service work, they have clients they genuinely enjoy and clients they quietly dread. The ones they enjoy tend to get more, for example, a heads-up about a planning opportunity, a faster turnaround when things are hectic, and a little extra thought applied to their situation. Difficult clients still receive competent, professional service. They just don’t get the extras. That’s not a policy; it’s just how people work.
The Three Things That Actually Move the Needle
None of this requires becoming a tax expert. It really comes down to three habits.
Send everything at once, and send it organized. Before you submit anything, set aside an evening to go through your documents. W-2s, 1099s, interest statements, charitable contribution records, mortgage forms, gather everything. If your preparer sends you an intake organizer or questionnaire, use it. It exists because it tells them exactly what they need in the format that’s easiest to work with. If they don’t use one, just organize things logically and label your files clearly. “Scan_final_2” is not a file name. A small amount of effort on your end saves a disproportionate amount of time on theirs.
Don’t send documents as they trickle in. It’s tempting to forward your W-2 the moment it hits your inbox, making you feel like you’ve gotten ahead of things. In practice, piecemeal delivery creates more problems than it solves, for example, things get overlooked, work gets duplicated, and many preparers won’t even open a file until they believe everything has arrived. There are legitimate exceptions: a K-1 that shows up late, a corrected 1099 that comes in after the fact. Any experienced preparer will understand those situations. But make them the exception rather than your default approach.
Respond promptly when they reach out. When your preparer sends you a question, it usually means they’re actively working on your file and have hit a wall they can’t get past without your input. A week-long delay doesn’t just slow things down; it forces them to set your return aside entirely and context-switch back to it later. That kind of stop-and-start cycle costs time, and depending on your billing arrangement, it may cost you money too.
Conclusion
A single organized evening and a commitment to responding quickly when questions come up. That’s genuinely most of what separates the clients’ preparers who enjoy working with them from the ones they don’t. In return, you get a smoother process, a more accurate return, and very likely some guidance you’d never have received if you’d shown up with a shoebox and gone quiet.
What Your Tax Preparer Wishes You Already Knew
March 1, 2026 · Blog, Guest Post of the Month, Uncategorized
⏱ 5 min read
Most people approach tax season thinking about one thing: getting their return done. What they rarely think about is what the experience looks like from the other side of the desk. Having seen it from both angles, I can tell you there’s a real difference between clients who make a preparer’s job easy and those who quietly make it harder than it needs to be.
Here’s why that matters to you specifically: being a better client isn’t about being polite for politeness’ sake. It translates directly into lower bills, faster turnarounds, and better advice. This is entirely in your own interest.
First, Understand How You’re Being Charged
The way the preparer bills you should shape how you work with them. There are three common arrangements, and each one rewards organization in a different way.
If you’re on a flat fee, the dollar amount doesn’t change whether your documents are immaculate or a complete mess. But here’s what does change: a preparer who powers through your tidy file in two hours now has time to actually think about your situation. That might mean spotting a deduction you’ve been missing for years or flagging something worth changing before next filing season. Advice like that can easily be worth more than the return preparation itself, but it only happens when there’s time and mental energy left over to give it.
Hourly billing leaves no room for ambiguity. Every follow-up email, every clarifying phone call, every minute your return sits untouched while you track down a missing form, it all runs the meter. Most of that extra cost is entirely preventable with a little upfront effort.
The hybrid model, which is a base fee with overage charges for complexity, is the most common setup you’ll encounter. Most preparers are generous about absorbing minor extra work without comment. But when documents arrive in scattered batches, questions go unanswered for days, and the timeline keeps slipping, that goodwill has a limit. And again, the extra charges that result are almost always avoidable.
There’s one more piece to this that doesn’t show up on any invoice. Tax preparers are human, and like anyone doing service work, they have clients they genuinely enjoy and clients they quietly dread. The ones they enjoy tend to get more, for example, a heads-up about a planning opportunity, a faster turnaround when things are hectic, and a little extra thought applied to their situation. Difficult clients still receive competent, professional service. They just don’t get the extras. That’s not a policy; it’s just how people work.
The Three Things That Actually Move the Needle
None of this requires becoming a tax expert. It really comes down to three habits.
Send everything at once, and send it organized. Before you submit anything, set aside an evening to go through your documents. W-2s, 1099s, interest statements, charitable contribution records, mortgage forms, gather everything. If your preparer sends you an intake organizer or questionnaire, use it. It exists because it tells them exactly what they need in the format that’s easiest to work with. If they don’t use one, just organize things logically and label your files clearly. “Scan_final_2” is not a file name. A small amount of effort on your end saves a disproportionate amount of time on theirs.
Don’t send documents as they trickle in. It’s tempting to forward your W-2 the moment it hits your inbox, making you feel like you’ve gotten ahead of things. In practice, piecemeal delivery creates more problems than it solves, for example, things get overlooked, work gets duplicated, and many preparers won’t even open a file until they believe everything has arrived. There are legitimate exceptions: a K-1 that shows up late, a corrected 1099 that comes in after the fact. Any experienced preparer will understand those situations. But make them the exception rather than your default approach.
Respond promptly when they reach out. When your preparer sends you a question, it usually means they’re actively working on your file and have hit a wall they can’t get past without your input. A week-long delay doesn’t just slow things down; it forces them to set your return aside entirely and context-switch back to it later. That kind of stop-and-start cycle costs time, and depending on your billing arrangement, it may cost you money too.
Conclusion
A single organized evening and a commitment to responding quickly when questions come up. That’s genuinely most of what separates the clients’ preparers who enjoy working with them from the ones they don’t. In return, you get a smoother process, a more accurate return, and very likely some guidance you’d never have received if you’d shown up with a shoebox and gone quiet.
Disclaimer
These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact a professional regarding the topics in these articles. The images linked to these articles are protected by copyright and should not be copied for any reason.
After a whirlwind 2025 that produced what may be the largest tax bill in American history, the coming year looks dramatically different. Tax policy experts are predicting a legislative standstill, a turbulent tax filing season, and lingering questions about how new provisions will work when put into practice.
A Year of Legislative Gridlock
The forecast for 2026 tax legislation is bleak. With Republicans clinging to an impossibly thin House majority of just 218 or 219 seats following recent resignations, passing any significant bills will be extraordinarily difficult. Every single Republican vote would be needed to advance legislation through reconciliation, and as 2025 demonstrated, keeping the caucus unified is no small feat.
While there has been discussion about a potential second reconciliation bill, most observers view this as wishful thinking. If such a bill were to materialize, it would likely focus on technical corrections to lingering Tax Cuts and Jobs Act issues and problems that emerged from the One Big Beautiful Bill Act. One notable concern involves accelerated research credits that did not deliver the benefits lawmakers intended because of unexpected interactions with the corporate alternative minimum tax.
The more pressing concern will simply be keeping the government running. A January deadline looms to avoid another shutdown and, given the contentious relationship between House Republicans and Democrats throughout 2025, even basic funding bills face uncertain prospects. With midterm elections consuming attention in the second half of the year, legislative bandwidth for tax policy will be virtually nonexistent.
A Rough Road Ahead for Taxpayers
The 2026 tax filing season is shaping up to be challenging. The IRS has experienced unprecedented upheaval, losing somewhere between 20 percent and 25 percent of its workforce through a combination of voluntary resignations and reductions in force. Many of these departures came from enforcement divisions, though customer service will also feel the impact.
Leadership instability has compounded these problems. The agency cycled through roughly seven commissioners or acting commissioners in 2025 alone. Former Congressman Billy Long was confirmed as commissioner but lasted less than two months before departing under unclear circumstances. The Treasury Secretary has since taken direct oversight of the agency, and an IRS CEO position was created for the first time in the agency’s history. No new commissioner nominee has been put forward, and there is currently no Senate-confirmed chief counsel either.
For taxpayers who need more than basic return processing, this means longer wait times, fewer answered phone calls, and potential delays. Those filing straightforward W-2 returns seeking refunds will likely fare better than individuals or businesses with complicated situations requiring IRS assistance. Audit rates will decline intentionally, as the current administration has committed to scaling back the enforcement emphasis of the Biden years.
The Justice Department’s Tax Division also has been gutted, losing many qualified litigators who previously maintained an exceptional track record against large taxpayers in court. This erosion of enforcement capability may not immediately move voluntary compliance numbers, but continued cuts will eventually catch up with the system.
Unresolved International Questions
The relationship between U.S. tax policy and the global minimum tax framework under Pillar 2 remains unsettled. Republicans declined to include a retaliatory tax provision known as section 899 in last year’s legislation based on an agreement with G20 nations. If that agreement unravels, there may be pressure to revisit retaliatory measures, though passing such legislation with current House margins seems unlikely.
American companies operating internationally could face pressure in foreign jurisdictions if the United States fails to align with Pillar 2 requirements. While many in Washington believe the international minimum tax framework will collapse, the reality on the ground suggests otherwise, and this disconnect might force future legislative action.
Conclusion
The bottom line for 2026: expect a holding pattern on major tax legislation and brace for a difficult filing season as an understaffed and unsettled IRS works to implement last year’s massive changes.
What to Expect from U.S. Tax Policy in 2026
February 1, 2026 · Blog, Tax and Financial News, Uncategorized
⏱ 4 min read
After a whirlwind 2025 that produced what may be the largest tax bill in American history, the coming year looks dramatically different. Tax policy experts are predicting a legislative standstill, a turbulent tax filing season, and lingering questions about how new provisions will work when put into practice.
A Year of Legislative Gridlock
The forecast for 2026 tax legislation is bleak. With Republicans clinging to an impossibly thin House majority of just 218 or 219 seats following recent resignations, passing any significant bills will be extraordinarily difficult. Every single Republican vote would be needed to advance legislation through reconciliation, and as 2025 demonstrated, keeping the caucus unified is no small feat.
While there has been discussion about a potential second reconciliation bill, most observers view this as wishful thinking. If such a bill were to materialize, it would likely focus on technical corrections to lingering Tax Cuts and Jobs Act issues and problems that emerged from the One Big Beautiful Bill Act. One notable concern involves accelerated research credits that did not deliver the benefits lawmakers intended because of unexpected interactions with the corporate alternative minimum tax.
The more pressing concern will simply be keeping the government running. A January deadline looms to avoid another shutdown and, given the contentious relationship between House Republicans and Democrats throughout 2025, even basic funding bills face uncertain prospects. With midterm elections consuming attention in the second half of the year, legislative bandwidth for tax policy will be virtually nonexistent.
A Rough Road Ahead for Taxpayers
The 2026 tax filing season is shaping up to be challenging. The IRS has experienced unprecedented upheaval, losing somewhere between 20 percent and 25 percent of its workforce through a combination of voluntary resignations and reductions in force. Many of these departures came from enforcement divisions, though customer service will also feel the impact.
Leadership instability has compounded these problems. The agency cycled through roughly seven commissioners or acting commissioners in 2025 alone. Former Congressman Billy Long was confirmed as commissioner but lasted less than two months before departing under unclear circumstances. The Treasury Secretary has since taken direct oversight of the agency, and an IRS CEO position was created for the first time in the agency’s history. No new commissioner nominee has been put forward, and there is currently no Senate-confirmed chief counsel either.
For taxpayers who need more than basic return processing, this means longer wait times, fewer answered phone calls, and potential delays. Those filing straightforward W-2 returns seeking refunds will likely fare better than individuals or businesses with complicated situations requiring IRS assistance. Audit rates will decline intentionally, as the current administration has committed to scaling back the enforcement emphasis of the Biden years.
The Justice Department’s Tax Division also has been gutted, losing many qualified litigators who previously maintained an exceptional track record against large taxpayers in court. This erosion of enforcement capability may not immediately move voluntary compliance numbers, but continued cuts will eventually catch up with the system.
Unresolved International Questions
The relationship between U.S. tax policy and the global minimum tax framework under Pillar 2 remains unsettled. Republicans declined to include a retaliatory tax provision known as section 899 in last year’s legislation based on an agreement with G20 nations. If that agreement unravels, there may be pressure to revisit retaliatory measures, though passing such legislation with current House margins seems unlikely.
American companies operating internationally could face pressure in foreign jurisdictions if the United States fails to align with Pillar 2 requirements. While many in Washington believe the international minimum tax framework will collapse, the reality on the ground suggests otherwise, and this disconnect might force future legislative action.
Conclusion
The bottom line for 2026: expect a holding pattern on major tax legislation and brace for a difficult filing season as an understaffed and unsettled IRS works to implement last year’s massive changes.
Disclaimer
These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact a professional regarding the topics in these articles. The images linked to these articles are protected by copyright and should not be copied for any reason.
Also known as a Senior Note, Senior Debt consists of a company’s outstanding loans collateralized by the business’ assets. As the name implies, Senior Debt holders are the first claimants of the business’ cash flows and/or liquidated assets if that business defaults on its debt and files for bankruptcy. Subordinated or junior debt in the form of Preferred and Common Equity shares has claims to any subsequent assets – but only after Senior Debt holders are made whole.
Originating via financial institutions, revolving credit facilities, and Senior Term Debt are the primary ways companies obtain financing. Whether the debt is funded by another business, an individual backer, or a traditional bank lender, if the borrowing company files for bankruptcy and liquidates its assets, Senior Bondholders are first in line for available repayment.
Senior Debt Characteristics and Structure
Much like any type of borrowed money, each tier has different interest rates and amortization schedules, including Senior Debt. Senior Debt issuers put terms in the debenture restricting companies from issuing additional, lower-tier debt. Debt issuers often require borrowers to maintain specific credit profiles, which are determined by financing ratios such as interest service coverage and debt service coverage.
Other stipulations may include requiring the borrower to maintain or refrain from business activities beyond their essential commercial functions. If the stipulations are flouted, the lender may retract, modify the borrowing terms, or mandate immediate payment of accrued interest and principal. It’s important to note that since Senior Debt has more restrictive terms, interest rates are generally lower compared to unsecured/less senior debt.
When it comes to unsecured debt, primarily junior or subordinated debt, although it’s not collateralized, the terms stipulate that the lender(s) have a claim to the company’s assets in case of bankruptcy/liquidation and are next in line to get paid off from the assets of the company, minus any pledged assets for secured debt debtholders.
Accounting Considerations
The first step to account for Senior Debt is to break it up into short-term and long-term debt (within 12 months and longer than 12 months). For example, long-term debt, which turns into long-term liabilities from short-term obligations, like accounts payable, is recorded on the company’s balance sheet. This generally happens when the short-term obligations are re-classified into a lengthier note.
If a business obtains a $10 million bank loan, secured by their machinery and other assets, for a new product line, with a 7 percent interest rate for 15 years, along with the business assets, liabilities and shareholders’ equity, the long-term portion would be reported on the company’s balance sheet. It would be recorded as a liability on the balance sheet, where any other long-term debt and bonds issued or borrowed by the company.
The income statement would document its loan interest. It’s calculated by taking the principal multiplied by the interest rate. Once the interest is determined, it’s classified as an expense on the income statement, lowering the company’s net income and profits. As the loan’s principal is paid over the 15-year loan life, a set amount of the loan principal is repaid each year.
Conclusion
Senior Debt can be an effective way to obtain funding, but businesses must understand how funding agreements work and how to properly account for them.
Accounting Considerations for Senior Debt
February 1, 2026 · Accounting News, Blog, Uncategorized
⏱ 3 min read
Also known as a Senior Note, Senior Debt consists of a company’s outstanding loans collateralized by the business’ assets. As the name implies, Senior Debt holders are the first claimants of the business’ cash flows and/or liquidated assets if that business defaults on its debt and files for bankruptcy. Subordinated or junior debt in the form of Preferred and Common Equity shares has claims to any subsequent assets – but only after Senior Debt holders are made whole.
Originating via financial institutions, revolving credit facilities, and Senior Term Debt are the primary ways companies obtain financing. Whether the debt is funded by another business, an individual backer, or a traditional bank lender, if the borrowing company files for bankruptcy and liquidates its assets, Senior Bondholders are first in line for available repayment.
Senior Debt Characteristics and Structure
Much like any type of borrowed money, each tier has different interest rates and amortization schedules, including Senior Debt. Senior Debt issuers put terms in the debenture restricting companies from issuing additional, lower-tier debt. Debt issuers often require borrowers to maintain specific credit profiles, which are determined by financing ratios such as interest service coverage and debt service coverage.
Other stipulations may include requiring the borrower to maintain or refrain from business activities beyond their essential commercial functions. If the stipulations are flouted, the lender may retract, modify the borrowing terms, or mandate immediate payment of accrued interest and principal. It’s important to note that since Senior Debt has more restrictive terms, interest rates are generally lower compared to unsecured/less senior debt.
When it comes to unsecured debt, primarily junior or subordinated debt, although it’s not collateralized, the terms stipulate that the lender(s) have a claim to the company’s assets in case of bankruptcy/liquidation and are next in line to get paid off from the assets of the company, minus any pledged assets for secured debt debtholders.
Accounting Considerations
The first step to account for Senior Debt is to break it up into short-term and long-term debt (within 12 months and longer than 12 months). For example, long-term debt, which turns into long-term liabilities from short-term obligations, like accounts payable, is recorded on the company’s balance sheet. This generally happens when the short-term obligations are re-classified into a lengthier note.
If a business obtains a $10 million bank loan, secured by their machinery and other assets, for a new product line, with a 7 percent interest rate for 15 years, along with the business assets, liabilities and shareholders’ equity, the long-term portion would be reported on the company’s balance sheet. It would be recorded as a liability on the balance sheet, where any other long-term debt and bonds issued or borrowed by the company.
The income statement would document its loan interest. It’s calculated by taking the principal multiplied by the interest rate. Once the interest is determined, it’s classified as an expense on the income statement, lowering the company’s net income and profits. As the loan’s principal is paid over the 15-year loan life, a set amount of the loan principal is repaid each year.
Conclusion
Senior Debt can be an effective way to obtain funding, but businesses must understand how funding agreements work and how to properly account for them.
Disclaimer
These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact a professional regarding the topics in these articles. The images linked to these articles are protected by copyright and should not be copied for any reason.
For private equity investors, 2026 is going to be a good year. Financing conditions are stabilizing, interest rates are decreasing, and valuations are beginning to reset. Further, these firms are moving to growth-at-any-cost strategies, deeper diligence, and more disciplined risk underwriting. Here’s a high-level look at a few things you can expect.
PE firms thrive despite policy and market uncertainty. Driven by shifting tariffs, interest-rate cycles, and election-year fiscal debates, 2025 was certainly a challenge. This year, many firms will re-enter the market and hit the ground running with greater conviction, supported by stronger diligence, scenario modeling, and operational planning. A few tactics include doubling down on operational risk management at the outset; leveraging advanced technologies to improve transparency and accuracy, specifically in terms of finance, tax, and regulatory compliance; and diversifying portfolios across sectors, geographies, and business models.
In 2026, deal volume and value will appreciate. This prediction is based on declining borrowing costs and uncertainty around tariffs declining. Leading the acceleration are mega funds and middle-market managers with larger funds driving growth in deal value. But strategic buyers will also play a defining role in this escalation. According to a survey by BDO, 43 percent of fund managers say most competition for deals will come from strategic acquirers. Here’s why: Their ability to pay higher prices, driven by operational synergies and stronger balance sheets, will intensify pressure on PE funds on the buy side. Consequently, this creates more favorable exit conditions for PE funds looking to sell assets.
PE is betting on AI, big-time. Firms are making sizable investments in industries that are the backbone of AI transformation, including data centers, energy producersand network hardware suppliers. While these categories are capital-intensive and tap into measurable, long-term market demand, PE’s interest in AI expands beyond sector strategy and deal sourcing, as firms are looking at how to leverage AI not only for fund and portfolio company management, but also the investment life cycle (due diligence, fraud detection, standardized reporting), which improves the way decisions are made. Good news for investors, indeed.
Valuations will remain high for top-tier deals. Primarily, this isdriven by firms willing to pay premiums for companies considered resilient and/or strategically essential. Common features these businesses share are predictable cash flows, defensible business models, and a position in sectors with secular growth, such as AI, infrastructure, or technology-driven industries. Why? They’re better equipped to withstand macroeconomic volatility compared with other kinds of investments.
Lessons were learned from the 2021 buying frenzy. This eventful year was comprised of abundant liquidity, low interest rates, and pent-up post-pandemic demand, which led to aggressive dealmaking. Now that macro-conditions have shifted, those 2021 deals are struggling to perform. This year, fund managers are expected to learn from the dynamics of years past and recalibrate their strategies, looking more closely at valuations and focusing on fewer but high-quality deals. This builds greater flexibility for exit planning, whether it’s traditional sponsor-to-sponsor, strategic sales, or IPO pathways. For the private equity investors, 2026 might well supersede the revenue-rich dynamic of 2021.
These are a few of the variables that will affect the private equity market. That said, success will most likely depend less on timing markets and more on being operationally prepared to seize the lucrative, high-quality opportunities when they arise.
February 1, 2026 · Blog, Tip of the Month, Uncategorized
⏱ 3 min read
For private equity investors, 2026 is going to be a good year. Financing conditions are stabilizing, interest rates are decreasing, and valuations are beginning to reset. Further, these firms are moving to growth-at-any-cost strategies, deeper diligence, and more disciplined risk underwriting. Here’s a high-level look at a few things you can expect.
PE firms thrive despite policy and market uncertainty. Driven by shifting tariffs, interest-rate cycles, and election-year fiscal debates, 2025 was certainly a challenge. This year, many firms will re-enter the market and hit the ground running with greater conviction, supported by stronger diligence, scenario modeling, and operational planning. A few tactics include doubling down on operational risk management at the outset; leveraging advanced technologies to improve transparency and accuracy, specifically in terms of finance, tax, and regulatory compliance; and diversifying portfolios across sectors, geographies, and business models.
In 2026, deal volume and value will appreciate. This prediction is based on declining borrowing costs and uncertainty around tariffs declining. Leading the acceleration are mega funds and middle-market managers with larger funds driving growth in deal value. But strategic buyers will also play a defining role in this escalation. According to a survey by BDO, 43 percent of fund managers say most competition for deals will come from strategic acquirers. Here’s why: Their ability to pay higher prices, driven by operational synergies and stronger balance sheets, will intensify pressure on PE funds on the buy side. Consequently, this creates more favorable exit conditions for PE funds looking to sell assets.
PE is betting on AI, big-time. Firms are making sizable investments in industries that are the backbone of AI transformation, including data centers, energy producersand network hardware suppliers. While these categories are capital-intensive and tap into measurable, long-term market demand, PE’s interest in AI expands beyond sector strategy and deal sourcing, as firms are looking at how to leverage AI not only for fund and portfolio company management, but also the investment life cycle (due diligence, fraud detection, standardized reporting), which improves the way decisions are made. Good news for investors, indeed.
Valuations will remain high for top-tier deals. Primarily, this isdriven by firms willing to pay premiums for companies considered resilient and/or strategically essential. Common features these businesses share are predictable cash flows, defensible business models, and a position in sectors with secular growth, such as AI, infrastructure, or technology-driven industries. Why? They’re better equipped to withstand macroeconomic volatility compared with other kinds of investments.
Lessons were learned from the 2021 buying frenzy. This eventful year was comprised of abundant liquidity, low interest rates, and pent-up post-pandemic demand, which led to aggressive dealmaking. Now that macro-conditions have shifted, those 2021 deals are struggling to perform. This year, fund managers are expected to learn from the dynamics of years past and recalibrate their strategies, looking more closely at valuations and focusing on fewer but high-quality deals. This builds greater flexibility for exit planning, whether it’s traditional sponsor-to-sponsor, strategic sales, or IPO pathways. For the private equity investors, 2026 might well supersede the revenue-rich dynamic of 2021.
These are a few of the variables that will affect the private equity market. That said, success will most likely depend less on timing markets and more on being operationally prepared to seize the lucrative, high-quality opportunities when they arise.
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For private equity investors, 2026 is going to be a good year. Financing conditions are stabilizing, interest rates are decreasing, and valuations are beginning to reset. Further, these firms are moving to growth-at-any-cost strategies, deeper diligence, and more disciplined risk underwriting. Here’s a high-level look at a few things you can expect.