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)
- 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)
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)
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)
What Providers Should Do Now
- Update systems to identify remittances funded by qualifying physical instruments.
- Train staff to collect and remit the tax properly, including sourcing the amount and sending remittances via required channels.
- Set up accounting for semi-monthly deposits and quarterly returns using Form 720.
- Apply penalty relief rules via Notice 2025-55 to shield early missteps—avoid severe exposures.
- Monitor final regulations—comment period closed June 12, 2026. (irs.gov)
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)
👇 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.