Tax Planning
Mastering the Remittance Transfer Tax: Planning Tips for Individuals Sending Money Abroad
A 1 % remittance transfer tax now applies to many cross-border payments made via physical instruments—here’s how to plan ahead and reduce exposure.
By NomadicTax Research Team • 5-8 min read • May 2, 2026
## What Is the Remittance Transfer Tax?
The One, Big, Beautiful Bill (OBBBA) introduced a **new 1 % excise tax**, effective **January 1, 2026**, on remittances sent from the United States to foreign recipients when payment is made using **cash, money orders, cashier’s checks**, or similar physical instruments. The sender is responsible for the tax, but remittance providers may share in liability if they do not collect properly. ([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 Pay—and What Exemptions Might Apply?
Individuals making remittances via physical instruments (not electronic transfers) fall under the tax. Many electronic methods are not taxed under this specific excise tax, though remittance transfer providers have responsibilities to collect and to file returns. For example,
- Providers must **make semimonthly deposits** and file **Form 720** quarterly. ([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))
- If the provider fails to collect, the provider may be held 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))
## Tax Planning Tips to Reduce Exposure
| Strategy | Description | Use Case |
|---|---|---|
| Switch to electronic transfers | Using bank wire, ACH, or other non-physical instrument avoids the 1 % charge. | Sending \$5,000 via cashier’s check vs. bank wire—wire avoids the tax. |
| Prepay or combine remittances | Fewer transactions using physical instruments may reduce total tax. | Instead of weekly money orders, do one monthly combined remittance. |
| Use compliant remittance providers | Ensure they are registered and understand deposit & reporting requirements. | Avoid providers unaware of their obligations under Form 720 reporting. |
## Implementation & Compliance Considerations
- The proposed regulations clarify definitions, including what counts as a “physical instrument” and what steps remittance providers must take. These are still **proposed**, with comments due **June 12, 2026**. ([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))
- The tax is retroactive as of January 1, 2026, meaning planning should account for remittances already made. |
## Example Scenario
Maria sends \$1,000 via money order to her family abroad every month using a physical instrument. Under the new remittance transfer tax, she'd owe \$10 per remittance (1 %). Over a year, that’s \$120 extra. If Maria instead uses an electronic bank transfer (if eligible), she’d avoid the excise tax entirely.