Compliance
Compliance Case Study: Navigating Remittance Transfer Tax & Penalty Relief under OBBB
A deep dive into the remittance transfer tax’s new requirements and relief provisions, showing how remittance-transfer providers can stay compliant yet minimize risk.
By NomadicTax Research Team • 5-8 min read • November 23, 2025
## Overview
Starting **January 1, 2026**, the One, Big, Beautiful Bill introduces a **new 1% excise tax on certain remittance transfers** that involve cash, money orders, cashier checks, or similar physical instruments. Provisions require providers to collect the tax, make **semimonthly deposits**, and file **quarterly returns** via **Form 720**. ([eitc.irs.gov](https://www.eitc.irs.gov/newsroom/topics-in-the-news?utm_source=openai))
## Penalty Relief & Transition Guidance
To ease the implementation burden, the IRS issued **Notice 2025-55**, which provides **limited penalty relief** for the first three calendar quarters of 2026. Key features include:
- Failure to deposit penalties (under IRC § 6656) can be avoided if providers **make timely deposits**, even if the amounts are calculated incorrectly. ([eitc.irs.gov](https://www.eitc.irs.gov/newsroom/topics-in-the-news?utm_source=openai))
- Providers must still pay any **underpayment in full** by the due date of the Form 720 quarterly return. ([eitc.irs.gov](https://www.eitc.irs.gov/newsroom/topics-in-the-news?utm_source=openai))
- Safe harbor rules for semimonthly deposits under § 40.6302(c)-1(b)(2) may still be used during these transition quarters if certain conditions are met. Providers must satisfy the **reasonable cause standard** for any failures. ([eitc.irs.gov](https://www.eitc.irs.gov/newsroom/topics-in-the-news?utm_source=openai))
## Practical Steps for Providers
- **Start planning now** by updating your systems to handle the semimonthly deposits requirement starting January 2026. Set software reminders for due dates (e.g., Jan 29, Feb 14, etc.).
- **Calculate estimates** of liability—even if you're tentative—to ensure deposits are timely, even if amount is off. Under Notice 2025-55 you can avoid penalties for incorrect calculations if deposit is made on time.
- **Ensure full payment by Form 720 due date** for each quarter. E.g., if you under deposit in the first semimonthly period, ensure the shortfall is made up before the quarterly filing deadline.
- **Document reasonable cause**: If you rely on this safe harbor or relief, keep documents showing system changes, internal efforts, or any reliance on published guidance.
## Example Scenario
> **Scenario**: GlobalWire, a remittance provider, collects remittances via physical cash transfers. In Q1 2026, their estimated remittance tax liability is $100,000.
> • They deposit $30,000 Jan 15 and $30,000 Jan 31 (timely, but under by $40,000).
> • They file Form 720 for Q1 by the due date and include payment of the remaining $40,000.
>
> Under Notice 2025-55, GlobalWire **avoids failure-to-deposit penalties** because deposits were timely (even if amount was off), and they fully paid any underpayment by the quarterly return due date, plus satisfy reasonable cause.
## Risks & Considerations
- After the first three calendar quarters of 2026, **standard penalty rules come back in force**; miscalculations will no longer be protected.
- Over-reliance on “reasonable cause” without strong documentation can lead to risk if audited.
- The safe harbor under § 40.6302(c) may not be applicable until certain look-back periods are established; early deposits may be scrutinized.
## Conclusion
The remittance transfer tax under the OBBB introduces new compliance duties, but the IRS’s penalty relief for 2026’s first three quarters gives providers breathing room. By proactively adjusting systems, monitoring deposits and returns, documenting internal efforts, and understanding timing, remittance providers can navigate this transition smoothly and avoid costly penalties.