Compliance
Compliance Playbook: Navigating Excise Penalties Under the New Remittance Transfer Tax
Starting January 1, 2026, providers collecting remittance transfers face a 1% excise tax—with new IRS relief for initial quarters—this guide walks through the rules, deadlines, and what you must do to stay compliant.
By NomadicTax Research Team • 5-8 min read • November 24, 2025
## What is the New Remittance Transfer Tax?
Under **Section 4475** of the Internal Revenue Code (part of the **One, Big, Beautiful Bill Act**), a **1% excise tax** is imposed on certain remittance transfers *after* December 31, 2025. The sender is responsible to bear the tax amount, but remittance transfer providers must **collect the tax from senders**, make **semi-monthly deposits**, and file **quarterly Form 720 returns** with the IRS. ([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))
## What Relief is Available
The IRS issued **Notice 2025-55** on October 7, 2025. It provides **penalty relief** (under section 6656, which usually penalizes failures to deposit) for the first **three calendar quarters of 2026**, IF remittance transfer providers meet certain conditions. Those include:
- Making deposits **on time**, even if amounts are mis-calculated.
- Paying any underpayment **in full** by the due date for Form 720 for that quarter. ([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))
Also, providers may still rely on the **deposit safe harbor rules** under § 40.6302(c)-1(b)(2) even if they underpay deposit requirements for those three quarters, provided they satisfy the reasonable cause standard. ([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))
## Key Dates & Deadlines
| Event | Date | Notes |
|---|---|---|
| 1% Tax takes effect for remittance transfers | January 1, 2026 | Applies to transfers using cash, money orders, cashier’s checks, etc. ([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 semi-monthly deposit due | January 29, 2026 | Covers remittances from Jan 1-15, 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)) |
| First quarter Form 720 due | April 2026 | Due date for Q1 remittance transfer tax. Penalty relief applies through Q3 if conditions met. |
| Deadline for penalty relief period ends | After Q3-2026 | Q4 onward standard rules & penalties apply |
## Who Needs to Comply
Remittance transfer providers (financial institutions, money transmitters) that:
- Facilitate transfers using physical instruments (cash, money orders, cashier’s checks) or similar mechanisms,
- Are responsible for **collecting** the tax from the sender,
- Will need systems in place to **calculate**, **deposit**, and **report** under the new rules.
Senders using digital transfers or via banks may have different obligations depending on whether the provider qualifies under the statute. Always verify the definitions. ([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))
## Compliance Checklist
- Map out all remittance services you offer and identify which will trigger Section 4475 tax.
- Update contracts or terms so sender is informed of the tax.
- Adjust billing/collection systems to add remittance tax.
- Establish semi-monthly deposit schedule; microsystems/software may need configuration.
- Mark your calendar for Form 720 filings.
- Document calculations and keep robust records—if you miss correct deposits but meet conditions for relief, good records can save penalties.
## Example Scenario
**Company A** is a remittance provider using cash instruments. In Q1 2026:
- They collect the remittance tax from senders but mis-calculate some amounts on their deposit schedule (underpaying slightly).
- They make *all* deposits by the deadlines (even if under water), and later, by the Form 720 due date for Q1, they pay the full amount owing.
- Under Notice 2025-55, because they satisfied the requirements, **no deposit penalty** will be imposed for that quarter.
But in **Q4 2026**, unless similar relief is extended, if they under-deposit, penalties could apply as usual.
## Risks if You Don’t Plan
- Hefty penalties starting Q4 2026 if deposit requirements are not met.
- Possible reputational damage or audit exposure.
- Cash flow surprises when accumulating excise tax for senders but failing to remit or file properly.
## Action Steps Before 2026
- Begin updating systems in late 2025 to incorporate tax, collection, deposit schedules.
- Train accounting/tax staff on the new rules & relief conditions.
- Budget to absorb potential shortfall in Q1-Q3 2026 if mis-calculations occur.
## Bottom Line
The remittance transfer excise tax is new, complex, and potentially burdensome—but Notice 2025-55 provides a grace period (first three quarters of 2026) for penalties if you comply with certain requirements. Advance preparation and clear systems will help you avoid trouble when the full rules kick in.