Digital Nomad
How the Remittance Transfer Excise Tax Affects Digital Nomads and Small Businesses
Understanding the 1% remittance excise tax: what triggers it, who pays, how small business owners and digital nomads can plan ahead to avoid surprises.
By NomadicTax Research Team • 5-8 min read • May 26, 2026
## What Is the Remittance Transfer Excise Tax?
Under section **70604** of the **One, Big, Beautiful Bill Act (Public Law 119-21)**, the U.S. introduced a **1% excise tax** on certain remittance transfers sent abroad when the sender uses **cash, money orders, cashier’s checks, or similar physical instruments** and the remittance transfer provider facilitates the transaction. ([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)) This tax is collected from the sender, though providers are required to collect it and remit via **semimonthly deposits** and file **quarterly Form 720 returns**. ([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))
## Why It Matters for Digital Nomads & Small Businesses
Digital nomads or businesses making payments to family, contractors, or other parties abroad using these specified physical payment methods may be affected in ways often overlooked:
- ** cash-based methods trigger the tax**, unlike digital bank transfers or ACH (unless delivered via a physical instrument).
- **Small businesses or freelancers** paying overseas with money orders or cashier’s checks for supplies or contractors will need to budget for an extra 1%.
## Planning Strategies to Minimize Impact
- Use **non-physical instruments** (wire transfers, ACH, digital wallet, bank draft) where possible. These generally **don’t trigger** the remittance transfer excise tax.
- Work with remittance providers to ensure they’re aware of tax responsibilities (collection, deposit, filing) to avoid passthrough liabilities.
- Keep detailed records of any physical instrument used, amount transferred, remittance provider, and date—because audit risk increases when physical instruments are misused or not properly documented.
## Example Scenario
You’re a remote worker living in Spain earning income in the U.S. You often send money to your family in another foreign country using money orders. Starting Jan 1, 2026, those transfers are likely subject to the 1% excise tax. You pay a $2,000 money order for your family abroad—you’ll need to pay $20 extra in excise tax if the provider collects properly. If you switch to an electronic wire transfer method that doesn’t involve the specified physical instruments, you avoid the additional tax.
## Compliance and Reporting Requirements
- **Remittance providers** must collect the tax, make semimonthly deposits, and file Form 720. Failure to collect or report could make providers liable. ([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** should verify the form of payment used and ensure that the remittance provider is aware of and fulfilling their duties under the law.
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**Bottom line**: While the excise tax targets remittances sent by specific payment types, its ripple effects are felt by digital nomads and small businesses making frequent cross-border payments. Use digital transfers where possible and verify that providers comply—every 1% adds up.