Author: Service2Client

The Value of Diversifying with International Stocks

The Value of Diversifying with International StocksWhen investors think about building a strong equity portfolio, U.S. stocks often dominate the conversation. The United States is home to many of the world’s most innovative, profitable, and well-known companies, and has a history of delivering strong long-term returns. However, the United States is not the only country with successful, growth-oriented businesses. In fact, nearly half of the global equity market is located outside the United States, offering investors a much broader opportunity than in domestic markets alone.

Despite this reality, many investors stick to a home country bias. This behavioral tendency means they prefer companies headquartered in their own country because they’re more familiar and feel safer. Unfortunately, home country bias can unintentionally increase portfolio risk. A singular concentration of investments in one geographic region exposes investors to country-specific economic cycles, policy changes, and market disruptions, while limiting access to attractive opportunities elsewhere in the world.

Global investing offers the following benefits:

  • Overall Diversification – Spreading investments across different markets, sectors, industries, companies and currencies in various countries improves opportunities for higher growth potential while balancing risk.
  • Highly Regarded Brand Names – Investing internationally offers access to a larger universe of well-established global brands. Household names such as Toyota, Nestlé, and Samsung are headquartered outside the United States, yet they generate revenues throughout the world, boasting strong balance sheets, consistent cash flow, and favorable long-term prospects. International stocks offer investors exposure to global innovation and consumption trends beyond U.S. markets.
  • Sector Diversification – In recent years, the U.S. stock market has become saturated with information technology and related industries – even among broad market index funds. While tech is a powerful growth driver, this concentration increases portfolio risk if the sector underperforms. International markets tend to have greater representation in other sectors, such as industrials, financials, materials, and consumer staples, so adding international stocks can help diversify overall sector exposure.
  • Currency Diversification – International investing exposes U.S. investors to foreign currencies, which reflect the economic conditions of their respective countries. Because currencies do not always move in tandem, holding assets denominated in multiple currencies can help reduce overall portfolio volatility. For example, if the U.S. dollar weakens, gains from foreign currencies may partially offset losses in U.S. dollar-denominated investments. While currency movements can add risk in the short term, they may provide an additional layer of diversification over the long term.
  • Country Diversification – International investing extends beyond developed markets to include emerging economies around the globe. Emerging markets are countries experiencing rapid economic growth, industrialization, and rising household incomes. Examples include India, Brazil, South Korea, and Taiwan. While emerging markets can offer higher growth potential, they also tend to be more volatile. For this reason, investors should consider allocating only a modest portion of their international exposure to emerging markets as part of a diversified strategy.

Diversify Risk Via Your Investment Vehicle

While international stocks offer diversification and growth potential, they also come with distinct risks, including regulatory differences, lower market liquidity, and political instability. Also note that international investments may involve higher transaction costs compared to domestic securities, especially when purchasing individual foreign stocks

Investors can help mitigate these risks by choosing inherently diversified investment vehicles, such as international mutual funds and exchange-traded funds (ETFs). Broad index-tracking funds are often the most cost-effective way to gain exposure, while professionally managed mutual funds can actively navigate changing global conditions.

International stocks provide access to companies, markets, and currencies that cannot be reached through domestic investments alone. When thoughtfully integrated into a portfolio, they may enhance diversification and improve long-term risk-adjusted returns.

5 Tax Tips for High Earners

5 Tax Tips for High EarnersIf you’re a high-income earner, generally defined as household incomes over $350,000, there are some key things you might want to keep in mind come tax season. Here are a few of the strategies to consider that not only maximize your financial benefits but also minimize tax liabilities.

Boost Retirement Contributions

By increasing savings in your 401(k) and IRA accounts, you can reduce your current tax liability while building your nest egg. Here’s a closer look:

  • 401(k)s – In 2026, you can contribute up to $24,500. If you’re over 50, there’s a catch-up option of an extra $8,000, and better still, if you’re between 60-63, the catch-up contribution limit increases to $11,250. By doing these things, you lower your income and, thus, your tax bill.
  • Traditional IRAs – You can contribute up to $7,500 in 2026 with an additional catch-up contribution of $1,100 for individuals age 50 and older. Note that while you can make traditional IRA contributions regardless of income levels, the tax deduction phases out at certain income thresholds.
  • Roth IRAs – These products are popular because they let you sock away after-tax dollars. That said, your eligibility to contribute, capped at $7,500 in 2026, varies with income levels. Taxes are paid up front, but withdrawals, including earnings, are tax-free later. Woot! Beware, however, that the ability to directly contribute to a Roth IRA starts to phase out at $153,000 for single filers and $242,000 for those married filing jointly.

Implement Tax-Efficient Investments

Here are three more strategies to consider for reducing your tax burden:

  • Buy municipal bonds. With these securities, you may gain tax-free income that reduces your taxable income.
  • Buy dividend-paying stocks. Payouts from stocks give you lower-taxed income and wealth growth.
  • Invest in opportunity zones. These zones, defined as underserved, low-income communities, not only offer tax deferral but also provide community investment. Paying it forward pays yourself – and others.

Leverage Charitable Giving

And being strategic about it is critical when trying to reduce your tax bill. For instance, you might set up a donor-advised fund (DAF), which is an efficient way to manage your giving while securing tax benefits. You can set one up through a financial institution or a community foundation. Once you contribute, you’ll get an immediate tax deduction. However, this deduction is subject to certain limitations based on your adjusted gross income (AGI) – 60 percent for cash contributions and 30 percent for contributions of appreciated securities. Still, it reduces your taxable income for the current year. And that’s a good thing.

Gift Assets to Your Family

This is another good strategic move. Both you and your relatives will love it. In fact, the IRS lets you give up to $19,000 per year (as of 2026) without triggering gift taxes. Think college tuition or home down payments. However, while gifting assets can reduce the size of your taxable estate, it does not reduce your taxable income for income tax purposes. But here’s the upside: By using the gift tax exclusion, you’ll avoid increasing your estate tax liability later on.

Utilize Qualified Charitable Distributions (QCDs)

If you’re retired and over 70 ½, QCDs offer a powerful tax advantage. Get this: you can transfer up to $111,000 annually (in 2026) directly from your IRA to qualified charities without counting that amount as taxable income.

These are just a few of the ways high-earners can strategize for taxes. But no matter what tools and strategies you harness, the goal is to put together a smart plan so you can keep more of what you earn.

 

Sources

https://www.farther.com/foundations/tax-planning-strategies-for-high-income-earners#:~:text=401(k)%20and%20IRA%20Contributions,situation%20and%20provide%20personalized%20advice

https://finance.yahoo.com/news/minimum-salary-required-considered-top-170108488.html?guccounter=1

Accounting Considerations for Senior Debt

What is Senior DebtAlso 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.

 

5 Private Equity Predictions for 2026

5 Private Equity Predictions for 2026For 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.

Sources

https://www.bdo.com/insights/industries/private-equity/2026-private-equity-predictions#:~:text=In%202026%2C%20many%20firms%20will,elevated%20relative%20to%20historical%20norms

Understanding the Equity Multiplier

What is Equity MultiplierWhether you are an investor, an owner, or an internal financial analyst, understanding how the equity multiplier works and how to interpret it is a helpful skill.

Defining the Equity Multiplier

The equity multiplier is a metric that tells the user what percentage of the company’s assets are loaned against shareholders’ equity. The smaller the calculated number for the equity multiplier, the less risky the financing is due to less debt owed by the company. It’s more favorable since there are lower debt servicing costs needed. When liabilities and/or assets change, the company’s equity multiplier changes.

Conversely, the bigger the equity multiplier, the more likely investors will be exposed to financial risk. This is due to the company having more outstanding debt, requiring more cash flows to service ongoing debt repayment, along with normal operations. A good rule of thumb is that anything lower than 2 is good, while anything higher than 2 signifies risk.

Putting It into Context

Since companies obtain financing through a mix of equity, debt, or both, it’s important to measure and monitor how the combination changes over time. Since investors look at the metric, among other financial yardsticks, it can influence how they determine if a company is worth investing in. Investors compare one company to others in the same industry and against historical measures to see how the company rates financially. The equity multiplier is measured relative to past measures, industry standards, or its sector competitors.

The ratio is calculated as follows:

Equity Multiplier = Total Assets / Total Shareholders’ Equity

Both input values are found on the company’s balance sheet, either on the quarterly or annual reports filed with the United States Securities and Exchange Commission.

If a company wants to go public, it can calculate this ratio to determine if its present results are robust for lenders’ review. Say a company has $2 million in total assets and $1.25 million in shareholders’ equity. Based on these numbers, it’s calculated as follows:

= $2,000,000 / $1,250,000 = 1.6  

The equity multiplier in this scenario, which shows a moderate amount of borrowing, may or may not pose an issue for the company’s financial health.

If a business’ total assets are $450 billion, and shareholders’ equity, according to the financial statements, was $150 billion, the company’s ratio is 3X ($450 / $150).

If a different company’s assets are $825 billion with $165 billion of shareholders’ equity, the same resulting ratio is 5X ($825 / $165).

These calculations show that as the ratio of liabilities and asset values adjusts, the equity multiplier also changes because a company uses less debt and more shareholders’ equity to finance the assets. While higher equity multipliers can help companies grow faster, especially during low interest rate and high-growth environments, if borrowing costs rise and/or sales fall dramatically, it can forecast negative growth. Investors favor businesses with low equity multipliers since this indicates the company is using more equity and less debt to finance the purchase of assets.

Regardless of the company or the industry, understanding how the ratio is calculated and used in making investment decisions makes sense for both companies and their potential investors.

Scam-Proof Guidelines for Wiring Money

Scam-Proof Guidelines for Wiring MoneyWiring money is like sending cash: Once you’ve sent it, it’s gone. It is very difficult to retrieve – in fact, more difficult than recovering physical dollar bills.

For businesses, always call the recipient to verify ACH details before sending; this is required by law in 50 states. This law does not require calling, but if the sender’s or recipient’s email is hacked, calling will help prevent the hacker from changing ACH details in a hacked email account.

If wire fraud takes place due to a security breach, such as a hacker infiltrating your account and initiating a wire transfer, you may have protection. Reputable financial institutions will generally cover your losses in the case of a cyber attack. Recoverability is dependent, however, on whether the wire was properly authorized or unauthorized and the payment type (wire vs. ACH).  However, if you fall for a scam and initiate the wire transfer yourself, you’re probably out of luck.

Another scenario is having an incorrect address or account number in your wire transfer instructions. For example, say you want to send a large sum of money to your lender to pay off your mortgage. It’s a good idea to contact the institution directly (by phone or in person) and ask them to tell you where to send your wire transfer to match it with the printed instructions you may have received. Always proofread the wire transfer instructions carefully.

Should you accidentally transpose the numbers in a wire transfer, you could lose that money. If you contact your bank immediately to report the error, they may be able to recall the funds. However, if the recipient has already accepted the transfer, particularly if they have transferred the money elsewhere, it is almost impossible to recover.

Remember, wire transfers settle quickly and are typically irreversible once accepted. That is why they are one of the prime targets for cybercriminals. If you are unfamiliar with the person or institution where you are wiring money, research them first to confirm their identity and see if there are any complaints or red flags associated with the entity. If you had no reason to initiate the wire transfer before being contacted, you should be especially suspicious.  Be extremely skeptical of unsolicited urgent requests, especially when instructions change, or you can’t verify independently

The following are some common scams perpetuated today.

Bank Fraud

Your bank or investment firm calls you directly to alert you to a possible scam; someone is attempting to hack into your account and steal your money. They may even verify your account with details they have obtained – such as your name, address, and perhaps even your Social Security and account numbers. Rather than an affirmation of their legitimacy, this should be a red flag. First of all, no legitimate financial institution or government agency would relay this information over the phone. Second, a fraudster may tell you the best way to block the potential hack is to open a new account and transfer your money there. This is a red flag. Third, the scammer may insist that time is of the essence – you must act immediately before your money is stolen.

If you get a call like this, hang up and either call (the number on your statement or debit/credit card) or visit your local bank branch to inquire about the call. Chances are good that the bank will confirm there is no breach and that your account is safe.

Dating Apps

Dating apps are the 21st-century version of blind dates. According to Statista, more than 60 million Americans used dating apps in 2024. Instead of meeting organically in a bar or at a party, users peruse dating profiles to find a prospective mate. Unfortunately, these platforms are rife with money-seeking predators – and they can be very patient.

Many online relationship predators interact for months before the scammer mentions that he or she is having money trouble. They may even wait for their paramour to offer money to help them out. Remember that the red flags apply – you didn’t initiate the need. The need for funds should never be immediate. You should research and verify the legitimacy of any person who would agree to accept money from someone they met online. Remember, once you send money, you may never hear from that person again. Or they may continue to interact, but you could get another request for funds a little further down the road.

One way to detect a dating app fraudster is by noticing clues that they are not who they claim to be. For example, many scammers live in other countries. They may not be familiar with common local interests in the town or city where they say they are from. Or, you may notice unusual grammar or phrasing in their communications, indicating English is not their native language.

The Friend or Relative Scam

One of the most heart-rending scams is when a person – often a senior citizen – is asked by a struggling friend or family member to send money. For example, a grandchild away at college who says she doesn’t want her parents to know she needs money. Pulling at the heartstrings, paired with aging cognitive decline, is a recipe for wire transfer fraud. It’s a good idea to establish a “family password” with which to verify proof of identity for suspicious scenarios. Also, call the family member or friend back at a known number for verification before sending money.

Investment Scam

The too-good-to-be-true investment opportunity is an old scam still used today, often to entice the purchase of cryptocurrency with cash. As with all these potential scams, do your due diligence and confirm the legitimacy of the receiver and their details.

The best way to prevent money wire fraud is to stay up to date with the latest scams and trust your gut: Do not act until you have thoroughly researched the details.

Reclaiming the Rent: Why 2026 is the Year Businesses Switch from SaaS to Sovereign Ownership

Businesses Switch from SaaS to Sovereign OwnershipEvery modern business is paying rent. Not for office space or equipment, but for the digital infrastructure that runs the company. This might include the cost of CRMs, email platforms, project management tools, automation tools, analytical dashboards, and countless other tools designed to solve a specific business need. Individually, these tools seem affordable; collectively, they form a permanent tax on business growth.

For several years now, software-as-a-service (SaaS) has been sold as a form of freedom. Businesses were promised low upfront cost, instant deployment, and minimal complexity. For a long time, SaaS delivered on this promise. It helped companies move faster, scale quickl,y and compete globally regardless of size.

But this is shifting. Now, business leaders are beginning to question whether renting critical systems is still a worthy strategy.

The SaaS Era

The rise of SaaS was a necessary evolution. It lowered the entry barrier for tools that once required large IT teams and a huge capital investment.

However, this convenience turned into dependency. Businesses not only adapted SaaS tools, but they also built operations around them. Third-party platforms now hold business workflows, customer data, analytics, automations, and even institutional knowledge. This means that a business has dozens of subscriptions they don’t fully control, can’t meaningfully customize, and must keep paying for to keep operating.

What Sovereign Ownership Means

Sovereign ownership doesn’t mean abandoning the cloud or rejecting modern technology; it means owning the core logic of your business systems. The sovereign models emphasize self-management, control and long-term resilience.

When a business practices sovereign ownership, it controls:

  • Where data resides (e.g., virtual private clouds or sovereign clouds)
  • Access permissions and encryption keys
  • Workflows and automations
  • Internal knowledge systems
  • AI models and training data
  • The ability to move, adapt, or rebuild without needing vendor permission

Self-sovereign identity has been a great support for this shift. SSI protocols allow businesses, employees, and customers to control their digital identities and credentials without relying on centralized identity providers. This means that identity is not locked inside the SaaS platform, as it is portable, verifiable, and owned by the entity itself.

The Real Cost of SaaS Goes Beyond the Invoice

SaaS costs more than renting the service. Aside from monthly or annual subscriptions that compound into a huge expense over time, vendor lock-in makes switching platforms painful and risky. The pricing models also keep changing. Features may be removed or placed under higher payment tiers. Other issues include broken integrations and limited or messy data exports.

More critically, companies adapt their workflows to match the SaaS tools, rather than the tool serving the business. Therefore, innovation is constrained by what the platform allows and not what the business needs.

The biggest risk is when a SaaS provider is acquired, suffers downtime, or shuts down entirely. When this happens, your business absorbs the impact without control or leverage.

Why 2026 Is the Turning Point

Why now? Because the alternatives have finally matured. Decentralized physical infrastructure (DePIN), the maturity of enterprise-grade, open-source software, and modular cloud architecture have made system ownership accessible without deep technical teams. AI has transformed how businesses build, automate, and maintain internal tools. Modular infrastructure allows companies to own their core while selectively renting specialized services.

At the same time, external pressure is increasing as data privacy regulations tighten. Regulatory frameworks like the U.S. Cloud Act, the GDRP and the EU’s Digital Operational Resilience Act (DORA) demand operational independence that SaaS cannot fully deliver. Gartner predicts that by 2030, 75 percent of enterprises outside of the United States will implement data sovereignty strategies due to regulatory scrutiny and geopolitical tensions.

Major players are already responding. IBM is one example of the shift, as they already announced IBM Sovereign Core, software that helps businesses take back control of their data and systems.

Customers are also more aware. They want to know how their data is stored, processed, and protected. AI models trained on proprietary information raise new questions of ownership and risk. In an uncertain global economy, businesses want cost predictability and not endless variable subscriptions.

The mindset is shifting from speed at any cost to resilience by design.

From Renters to Owners

SaaS helped businesses grow. But growth built on dependency has limits.

2026 represents a strategic window where ownership is finally accessible, affordable, and necessary. The shift toward sovereign systems is not about rebellion against technology that has previously helped businesses. It’s about leverage, resilience, and long-term value.

The future belongs to businesses that stop renting their foundations and start owning their future.

What to Expect from U.S. Tax Policy in 2026

What to Expect from U.S. Tax Policy in 2026After 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.

Completing FY2026 Budget Appropriations, Protecting Trafficked Victims, and Vetoing Special Interest Projects

HR 6938Commerce, Justice, Science; Energy and Water Development; and Interior and Environment Appropriations Act, 2026 (HR 6938) – This Act is one of the remaining budget bills to fund the government through Sept. 30, 2026. It includes funding for several agencies, including the Department of Commerce, the Department of Justice, the U.S. Army Corps of Engineers, the Department of Energy, and the Environmental Protection Agency. The bill was introduced by Rep. Tom Cole (R-OK) on Jan. 6. It passed in the House on Jan. 8, the Senate on Jan. 15, and was signed into law on Jan. 23.

Financial Services and General Government and National Security, Department of State, and Related Programs Appropriations Act, 2026 (HR 7006) – This Act was introduced by Rep. Tom Cole (R-OK) on Jan. 12. Yet another fiscal year 2026 budget bill, it authorizes investments to support economic growth and entrepreneurship, safeguard American security and authorize funding for the Executive and Judicial branches. The bill passed in the House on Jan. 14 and is awaiting passage in the Senate.

Trafficking Survivors Relief Act (HR 4323) – The purpose of this bipartisan bill is to help stop a vicious cycle that makes human trafficking victims vulnerable to further exploitation. The Act enables survivors to file motions to vacate non-violent convictions and purge arrest records for certain criminal offenses committed as a direct result of being trafficked. The current iteration of the bill was introduced by Rep. Russell Fry (R-SC) on July 19, 2025. It cleared the House on Dec. 1, the Senate on Dec. 18, and was signed into law on Jan. 23.

Finish the Arkansas Valley Conduit Act (HR 131) – Introduced by Rep. Lauren Boebert (R-CO) on January 3, 2025, this bill is related to a Colorado water infrastructure pipeline currently under construction, designed to port clean water from the Pueblo Reservoir to 50,000 Coloradans in the local area. The bill would have extended the repayment period for local municipalities and removed interest payments. The bill passed in the House on July 21 and in the Senate on Dec. 16; it was vetoed by the President on Dec. 31, 2025.

Miccosukee Reserved Area Amendments Act (HR 504) – This bill would have authorized the expansion of the Miccosukee Reserved Area to include a portion of Everglades National Park in Florida. In recent years, the area, known as Osceola Camp, has been prone to flooding, and this bill would have authorized safeguard measures to protect structures within the camp. The bill was introduced on Jan. 16, 2025, by Rep. Carlos Gimenez (R-FL). It passed in the House on July 14 and in the Senate on Dec. 11, 2025. The bill was vetoed by the President on Dec. 30 and failed an override vote in the House on Jan. 8.

Whole Milk for Healthy Kids Act of 2025 (S 222) – This Act amends the existing National School Lunch Act to allow schools participating in the federal school lunch program to serve whole milk. It was introduced by Sen. Roger Marshall (R-KS) on Jan. 23, 2025, passed the Senate on Nov. 20, the House on Dec. 15 and was signed into law by the President on Jan. 14.

Accounting for Net Charge Offs

Accounting for Net Charge OffsWhen it comes it understanding a net charge-off (NCO), it’s the difference between any recovery of delinquent debt and gross charge-offs a business sees in a defined accounting time frame. NCOs are debts a company projects with a low likelihood of being collected. It can happen when a customer stops paying outstanding invoices or sees a decline in their credit rating.  

The first step considers it as a gross charge-off; if any amount is recovered, it’s subtracted to arrive at net charge-offs. If businesses can recover a percentage of what’s been charged off, the recovered monies can be net against the gross charge-offs to realize net charge-offs. A business’ loan loss provision is lowered by the net charge-off amount at the end of the accounting time frame and then refilled for the next accounting time frame based on new estimates for loan losses. This is part of a business’ provision for credit losses (PCL) that projects a certain percentage of accounts unable to be collected.

Accounting in Detail

The following formula calculates net charge-offs (NCO). This assumes a gross charge-off booking of 6 percent of all outstanding loans, with 1 percent ultimately being recovered during a particular accounting time frame.

Net Charge-Offs = Gross Charge-Offs – Amount of Recovered Debt

= 6 percent – 1 percent = 5 percent

Once the figure is calculated, the 1 percent collected adjusts the loan loss provision in the accounting statements.

Financial Institutions Illustrate Accounting Considerations

Banks’ business models and financials demonstrate their ability to pay their depositors competitive interest rates while also being able to make loans. Since banks earn profits via net interest margin, earning a spread between what banks pay depositors on interest rates and what borrowers are charged on loans, the spread is integral to measuring profitability. To generate the total value of a bank’s balance sheet, it’s imperative for banks to estimate and project their charge-offs as accurately as possible.

Financial institutions determine credit loss provisions by analyzing their balance sheets and the level of risk represented by outstanding loans. They look at the ratio of loan losses to overall losses, which is their net charge-off rate. The net charge-off rate is used to evaluate a loan’s book quality against other banks.

How Different Risks Impact Net Charge-Off Levels

Banks that have different loan mixes will see different risk and reward payoffs. If one bank offers primarily secured loans, while it may have lower net interest margins, it will also have lower charge-offs because the collateral backing them is less risky overall. This is compared to other lenders that have a higher level of unsecured loans, such as credit cards and commercial loans. This scenario, in the case of riskier loans, may result in higher net interest margins, but also greater potential for higher losses.

Journal Entry Examples

The following journal entries illustrate how to account for bad debts. Using the direct write-off method, when debt collection efforts have been exhausted, bad debts are recorded as follows:

Expenses for bad debt: Debit $750

Accounts Receivable: Credit $750

If, however, the business recovers anything from the customer’s outstanding invoices, the following journal entries would be added if $200 were received:

Cash: Debit $200

Accounts Receivable: Credit $200

Conclusion

While this is primarily for early-stage companies with a low percentage of credit sales, it illustrates how businesses can update their books when projecting their numbers to account for net charge-offs.