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)
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) 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)
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)
- Remittance transfer providers have obligations: collecting the tax, making semimonthly deposits, filing quarterly returns using Form 720, and complying with reporting rules. (irs.gov)
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)
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.