Compliance
Compliance Essentials: Navigating the New Remittance Transfer Tax and Penalty Relief
Starting January 1, 2026, remittance transfer providers must comply with a new excise tax, but first three quarters carry special relief—this guide helps you get compliant and avoid penalties.
By NomadicTax Research Team • 5-8 min read • November 22, 2025
## Overview of the Remittance Transfer Tax Under OBBB
The One, Big, Beautiful Bill (OBBB) introduced **section 4475**, imposing a **1 % excise tax** on certain remittances beginning **January 1, 2026**. Remittance transfer providers must collect this tax from senders when the transfer is made via cash, money order, cashier’s check or similar instruments. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-penalty-relief-for-remittance-transfer-providers-who-fail-to-deposit-excise-tax-under-the-one-big-beautiful-bill?utm_source=openai))
Providers are required to:
- Make **semimonthly deposits** of collected tax for applicable periods (first semimonthly deposit due Jan 29, 2026)
- File **quarterly returns** using **Form 720**, Quarterly Federal Excise Tax Return, for each quarter starting in 2026. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-penalty-relief-for-remittance-transfer-providers-who-fail-to-deposit-excise-tax-under-the-one-big-beautiful-bill?utm_source=openai))
## Penalty Relief: First Three Quarters of 2026
Notice 2025-55 grants limited penalty relief under IRC § 6656 for the first three calendar quarters of 2026 if providers:
- make timely deposits—**even if the amount is calculated incorrectly**, and
- pay any underpayment **in full by the Form 720 due date** for that quarter. ([irs.gov](https://www.irs.gov/irb/2025-43_IRB?utm_source=openai))
Also, they may use the deposit safe harbor under § 40.6302(c)-1(b)(2) during this period if the reasonable-cause standard is satisfied. ([irs.gov](https://www.irs.gov/irb/2025-43_IRB?utm_source=openai))
## Practical Checklist for Providers
- Review procedures now for recording remittance transfers involving cash, money orders, cashier’s checks, etc. Identify which transactions are taxable.
- Adjust accounting systems so that transfers have sender identity and instrument type to track applicability.
- Start preparing for semimonthly deposit schedule. Note that miscalculations may be forgiven in 2026 Q1-Q3 if underpayment is paid on time.
- Train staff on where returns are filed (Form 720) and what schedule applies.
- Document reasonable cause (for example, confusion around implementing new law) in case of IRS inquiry. Keep logs of attempts and internal memos.
## Risks After the Relief Period
After the first three quarters of 2026, the penalty relief ends, so:
- All deposits must be timely *and accurate*.
- Underpayments after due dates will likely incur penalties under § 6656.
- Failure to meet deposit safe harbor may cost extra penalties.
## Example: MW Remittance Services
MW Remittance Services begins collecting the remittance tax starting January 5, 2026. They estimate semimonthly deposits based on cash remittances in first half of January. They make their first deposit on Jan 29, 2026, even though they miscalculate the total. They catch up and pay the underpayment by the Q1 Form 720 due date. Since this is among the first three quarters of 2026, MW avoids § 6656 penalties under Notice 2025-55.
## Key Deadlines Summary
- **January 1, 2026** — Excise tax obligations begin for covered remittances. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-penalty-relief-for-remittance-transfer-providers-who-fail-to-deposit-excise-tax-under-the-one-big-beautiful-bill?utm_source=openai))
- **First semimonthly deposit** — Jan 29, 2026. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-penalty-relief-for-remittance-transfer-providers-who-fail-to-deposit-excise-tax-under-the-one-big-beautiful-bill?utm_source=openai))
- **Quarterly returns** via Form 720 — filing deadlines as usual for excise taxes. Underpayments to be paid by those deadlines. Penalties abated in first three quarters if conditions met. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-penalty-relief-for-remittance-transfer-providers-who-fail-to-deposit-excise-tax-under-the-one-big-beautiful-bill?utm_source=openai))