Compliance
Compliance Alert: Remittance Transfer Tax—What Financial Service Providers Must Prepare For
Excise tax on remittances funded by cash or similar physical instruments takes effect Jan 1, 2026; providers must update collection, reporting and deposit systems before then.
By NomadicTax Research Team • 5-8 min read • July 7, 2026
## Remittance Transfer Tax Under OBBBA
Starting **January 1, 2026**, a **1% excise tax** is imposed on certain remittances sent from the U.S. to foreign recipients when the sender uses **cash, a money order, cashier’s check, or similar physical instrument**. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-proposed-regulations-on-the-new-remittance-transfer-tax-established-under-the-one-big-beautiful-bill?utm_source=openai))
- Sender is primarily liable, but remittance transfer providers must **collect the tax**, **make semi-monthly deposits**, and **file quarterly returns on Form 720**. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-proposed-regulations-on-the-new-remittance-transfer-tax-established-under-the-one-big-beautiful-bill?utm_source=openai))
## Proposed Regulations & Definitions
The IRS issued proposed regulations (REG-114499-25) that clarify:
- Exactly **which physical instruments trigger the tax** (cash, cashier’s check, etc.)
- What amount of transfers are taxed (excluding fees but including promotional value)
- Reporting timelines: Form 720 and semimonthly deposit deadlines outlined. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-proposed-regulations-on-the-new-remittance-transfer-tax-established-under-the-one-big-beautiful-bill?utm_source=openai))
## Transition & Penalty Relief
- Notice 2025-55 grants **limited relief from penalties** for remittance providers who make deposits incorrectly during the first three quarters of 2026—if they make timely deposits even if mis‐calculated, and pay the full liability by Form 720 deadline. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-proposed-regulations-on-the-new-remittance-transfer-tax-established-under-the-one-big-beautiful-bill?utm_source=openai))
## What Providers Should Do Now
1. **Update systems** to identify remittances funded by qualifying physical instruments.
2. **Train staff** to collect and remit the tax properly, including sourcing the amount and sending remittances via required channels.
3. Set up accounting for **semi-monthly deposits and quarterly returns** using Form 720.
4. Apply penalty relief rules via Notice 2025-55 to shield early missteps—avoid severe exposures.
5. Monitor final regulations—comment period closed June 12, 2026. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-proposed-regulations-on-the-new-remittance-transfer-tax-established-under-the-one-big-beautiful-bill?utm_source=openai))
## Illustrative Example
MSB “GlobalFX” processes $1 million remittance transfers in Q1 2026, of which $200,000 are funded via cash or money order. They must collect 1% on that $200,000 ($2,000), deposit semi-monthly, and file the tax via Form 720. If they miscalculate during early quarters, they can avoid penalties **if** they timely deposit when due and pay full amount by income tax filing deadlines. Notice 2025-55 provides the relief. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-proposed-regulations-on-the-new-remittance-transfer-tax-established-under-the-one-big-beautiful-bill?utm_source=openai))
👇 **Takeaway:** Financial service providers dealing in remittances need to move quickly—systems, contracts, accounting and compliance must align to new excise rules to avoid liability.