Compliance
Mastering the Remittance Transfer Tax: What U.S. Senders Need to Know in 2026
A new 1% remittance transfer tax takes effect for certain cross-border payments—learn who it applies to, how it's paid, and what to watch out for.
By NomadicTax Research Team • 5-8 min read • May 18, 2026
## What Is the Remittance Transfer Tax?
In 2025, the U.S. passed the **One, Big, Beautiful Bill (OBBB)** (Public Law 119-21), which imposes a **1% excise tax on certain remittance transfers** sent from the U.S. to foreign recipients when funded by specific physical instruments such as cash, cashiers’ checks, money orders, or similar forms. ([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 imposed on the amount sent to the recipient—fees and taxes paid to the sender or transfer provider generally aren’t included. ([irs.gov](https://www.irs.gov/irb/2026-18_IRB?utm_source=openai)) If fees are baked in and part of the amount that reaches the recipient (e.g. bonuses), they may become taxable. Clear record-keeping is essential. ([irs.gov](https://www.irs.gov/irb/2026-18_IRB?utm_source=openai))
## Who Pays, and Who Collects It
- **The sender** is primarily liable for paying this tax when the remittance is funded with the disallowed physical instruments. If the transfer provider doesn’t collect it, that liability may shift 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))
- **Remittance transfer providers** have obligations: collecting the tax, making semimonthly deposits, filing quarterly returns using **Form 720**, and complying with reporting rules. ([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))
## Proposed Regulations for Clarity
As of April 10, 2026, the Treasury and IRS issued **proposed regulations** providing more detail about definitions—e.g. what “physical instrument” means—when the tax attaches, and how the tax base is determined. These rules—with public comments due by **June 12, 2026**—also clarify that the tax only applies when the sender funds the remittance via those physical instruments, not through debit/credit cards or bank 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))
## Actionable Tips for Senders & Businesses
- If you're sending money overseas, **avoid using cash, cashier’s checks, or money orders** if you wish to avoid this tax. Use bank transfers or debit/credit cards instead, where possible.
- Remittance service providers should prepare systems to collect tax via eligible instruments, collect proper consent, and file the required returns.
- Review whether the proposed regulation definitions could change your tax or reporting obligations. For providers, submitting **comments by June 12, 2026** is critical.
## Example
Sarah sends \$1,000 in cash to her family across borders. Because she’s using cash (a covered instrument), she owes the 1% tax, so the transferred amount to her family = \$1,000; the excise tax is \$10. If Sarah had used a bank transfer instead, she would avoid this excise tax.
## Long-Term Impact
- **Compliance burden will increase** for remittance providers, especially those handling physical instrument-funded transfers.
- **Cost to senders** using certain payment methods will go up.
In summary: **avoid taxable instruments** for cross-border transfers or account for this 1% tax. And if you're in the business of remittance services, get systems ready before rules finalize.