Compliance
Compliance Under the Remittance Transfer Tax: What Businesses & Providers Should Do
The One, Big, Beautiful Bill introduced a 1% excise tax on certain remittance transfers starting January 1, 2026; businesses need to understand collection, depositing, and reporting obligations to stay compliant.
By NomadicTax Research Team • 5 min read • June 11, 2026
## What the Remittance Transfer Tax Is
Enacted by the One, Big, Beautiful Bill (OBBB), effective **January 1, 2026**, this excise tax imposes a **1% tax** on remittance transfers made from the U.S. to recipients abroad **when the sender funds the transfer using cash, a money order, a cashier’s check, or similar physical instrument**. ([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 Collect & File
- **Remittance Transfer Providers**: Required to collect the tax from senders when applicable, make semimonthly deposits, and file quarterly returns using **IRS Form 720**. If the provider fails to collect, the liability shifts to them. ([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))
### Key Operational Steps for Compliance
1. **Identify taxable funding instruments**: Includes cash, cashier’s checks, money orders, and newly added traveler’s checks. Payment with debit/credit cards or ACH generally excluded unless instrument is cashed to cash then used. ([irs.gov](https://www.irs.gov/irb/2026-18_IRB?utm_source=openai))
2. **Set up internal controls**: Train staff to distinguish between taxable vs non-taxable instruments; monitor instrument usage. Agents that cash checks need special attention. ([irs.gov](https://www.irs.gov/irb/2026-18_IRB?utm_source=openai))
3. **Meet deposit and return deadlines**:
- Semimonthly deposits due starting **Jan 29, 2026** for applicable transfers. ([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))
- File quarterly using Form 720. First quarters are already in effect. ([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))
4. **Penalty relief period**: Limited relief is available for first three quarters of 2026—if providers make timely deposits, even if amount is later adjusted. ([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))
### Example Scenario
> A money services business sends remittances using cash. For a $1,000 transfer (sender gives $1,000 in cash), plus a $5 bonus promotional amount to the recipient, **tax base is $1,005**, excluding any service fees. The 1% tax is **$10.05**. ([irs.gov](https://www.irs.gov/irb/2026-18_IRB?utm_source=openai))
## Risks & Mitigation
- **Using wrong payment instruments** could accidentally trigger tax obligations.
- **Failing to collect or remit** could lead to provider liability and penalties after relief period ends.
- **Audit exposure** if procedures are inconsistent, records incomplete.
## Action Steps
- Review your remittance operations: which instruments you accept, who funds them.
- Train all involved—retail agents included—on paperwork needed.
- Update IT systems to track taxable vs non-taxable transfers correctly.
- Keep careful records for quarterly filings and deposits.
- Monitor proposed regulations for any adjustments once finalized.
Maintaining compliance under this new regime requires operational discipline and proactive procedures. Providers who move early will reduce liability and avoid compliance risks post-2026 relief window.