Entity Setup
Entity Setup & Compliance: What New Remittance Excise Tax Means for U.S. Businesses
Starting Jan 1, 2026, entities making remittance transfers must comply with new excise tax, deposit requirements, and get penalty relief early—this article breaks down what businesses need to do to set up properly.
By NomadicTax Research Team • 5-8 min read • November 21, 2025
## Background: The Remittance Excise Tax Under OBBB
The One, Big, Beautiful Bill includes a **1% excise tax** on certain remittance transfers starting **January 1, 2026** under Section 4475. ([irs.gov](https://www.irs.gov/irb/2025-43_IRB?utm_source=openai)) Businesses that send money via cash, money orders, cashier’s checks, or similar physical instruments are often the providers responsible for collecting and depositing this tax. ([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))
To assist with implementation, the IRS published **Notice 2025-55** on **October 7, 2025**, providing limited penalty relief for failures to deposit accurately in the first **three quarters of 2026**, so long as deposits are made on time and any underpayments are paid by the relevant Form 720 due dates. ([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 Requirements for Entities Starting in 2026
- **Collection & Payment**: Providers must collect the 1% remittance tax from senders when using specified instruments. They need to **make semimonthly deposits** and **file quarterly returns** via **Form 720**. The first semimonthly deposit is due **January 29, 2026**. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions?utm_source=openai))
- **Reporting & Documentation**: Maintain records showing amounts sent, sender information, instrument type. Receipts or statements may need to reflect the tax collected. |
- **Timing**: Providers should begin systems design and staff training now so billing, remittance provider relationships, software, and cash handling can comply from Day 1. |
## How to Set Up Properly: Action Plan
1. **Identify whether your business qualifies**: Are you a remittance transfer provider as defined under Section 4475? If yes, examine cash-based remittances etc. |
2. **Revise contracts/invoices**: Make sender liable for the tax, or add as line item if law permits; ensure instrument types are tracked (money orders, cash, etc.). |
3. **Upgrade accounting systems/payroll**: Configure software to collect 1% excise tax, report properly, generate semimonthly deposits and quarterly returns. |
4. **Assign compliance officer**: Someone responsible for monitoring deposits, tracking deadlines (first deposit Jan 29, 2026), preparing Form 720. |
5. **Take advantage of penalty relief**: For 2026’s first three quarters, if miscalculations occur but deposits are timely and full payment of any underpayment by Form 720 due date, penalties may be waived under Notice 2025-55. ([irs.gov](https://www.irs.gov/irb/2025-43_IRB?utm_source=openai))|
## Example Case Study
> **TransferX Corp.**, a business that specializes in sending money orders abroad, will now be responsible for assessing, collecting, and depositing the remittance excise tax. In Q1 2026, they mis‐calculate the required deposit amount due to initial software error. Because they submitted the deposit on time, and paid off the shortfall by the Form 720 deadline, they avoid penalties for failure to deposit correctly—thanks to Notice 2025-55 relief. |
## Risks & Penalties
- Outside Q1–Q3 2026, no relief: providers who fail to deposit correctly after that will face standard penalties under IRC § 6656 and related sections. |
- Underestimating liability: even with relief, underpayments must be paid in full by due date of Form 720—late payments still penalized. |
- Misclassification: If providers don’t classify remittances correctly (e.g., instrument type), they may misapply tax responsibilities. |
## Summary
Starting January 1, 2026, remittance transfer providers must implement collection, deposit, and reporting of a 1% excise tax on certain transfers. However, Notice 2025-55 provides a short runway for entities to make timely deposits—even if calculated incorrectly—and avoid penalties for the first three quarters of 2026. Businesses need to update systems, contracts, and compliance protocols now to meet these requirements.