Compliance
Compliance Essentials for U.S. Remittance Transfer Tax in 2026
With the 1% remittance-transfer excise tax now in effect, noncompliance risks have increased—this guide details obligations, reporting requirements, and how to stay aligned.
By NomadicTax Research Team • 5-8 min read • July 19, 2026
## New Excise Tax: What It Is
As of **January 1, 2026**, U.S. law under the OBBBA imposes a **1% excise tax**—the **Remittance Transfer Tax**—on remittances sent from the United States to foreign recipients when the sender provides a **physical instrument** (cash, money orders, cashier’s checks, etc.) to a remittance transfer provider. The tax liability falls first on the sender, but the provider may be required to collect it.([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))
## Who Must Comply & How
### Remittance Transfer Providers Must:
- Collect the excise tax from senders when required.
- Make **semimonthly deposits** of the tax collected.
- File **Form 720**, the Quarterly Federal Excise Tax Return.([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))
### Senders Must:
- Pay the 1% tax when remitting via eligible physical instruments.
- Understand that if the provider fails to collect, they may assume liability. Businesses sending frequent transfers need to track and record these payments clearly.
## Risk Exposure & Penalties
Noncompliance could lead to:
- Penalties for failure to collect or deposit proper amounts
- Interest on late deposits
- Audit exposure if remittance activity is material and undocumented
Providers should ensure their front-desk staff, financial controls, and system setups include these remittance tax rules.
## Practical Steps for Compliance
1. **Map processes** where physical instrument-based remittances occur (e.g., cash offices, check-based payments). Identify employees who handle these.
2. **Train staff** on identifying applicable instruments and correct tax collection.
3. **Maintain accurate records**, including date, amount, recipient’s country, type of instrument.
4. **Use correct forms:** ensure Form 720 submission deadlines are met; semimonthly deposit schedules adhered to.
5. **Review contracts** with third-party remittance providers—ensure it's clear who bears liability and who collects tax.
## Example Scenario
A company paying contractors abroad via cashier’s checks issued in the U.S. qualifies: the sender must pay 1% remittance tax. If the remittance provider issues multiple checks weekly, semimonthly tax deposits must be made by the provider per IRS schedule. Missing late-month deposits exposes penalty risk.
## Integration with Other Laws
- This is separate from foreign exchange reporting or FATCA obligations.
- Align with anti-money laundering rules and Know Your Customer (KYC) when physical transfers cross higher thresholds.
## Takeaway
Organizations and individuals involved in sending physical remittances abroad should evaluate their exposure now. With the tax in force, businesses that fail to train teams or track remittances may face penalties. Even small remittances can accumulate, making attention to detail essential.