Compliance
Navigating Compliance Relief: Remittance Transfer Excise Tax and Safe Harbors for 2026
2026 brings a new remittance transfer tax, but the IRS is offering relief and safe harbors to ease initial compliance burdens—here’s what businesses must know.
By NomadicTax Research Team • 5-8 min read • November 15, 2025
## What Is the Remittance Transfer Tax?
The One, Big, Beautiful Bill (OBBB) introduces a **1% excise tax** under IRC Section 4475. It applies to certain remittance transfers made using cash, money orders, cashier’s checks, or similar **physical instruments**. The tax begins Jan. 1, 2026. Companies facilitating these transfers must collect the tax from senders, make semimonthly deposits, and file quarterly returns using Form 720. ([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))
## Compliance Relief in 2026
To ease the burden of implementation, the IRS and Treasury issued **Notice 2025-55**, providing relief from **failure to deposit penalties** under § 6656 for the first three quarters of 2026. Relief is provided if:
- The provider **makes deposits on time**, even if calculated incorrectly.
- Any underpayment for those quarters is **paid in full** by the due date for filing Form 720.
In addition, the rules allow the use of the **deposit safe harbor** under 26 CFR § 40.6302(c)-1(b)(2), even when providers are unable to use the standard look-back quarter method until Q3 2026. ([irs.gov](https://www.irs.gov/irb/2025-43_IRB?utm_source=openai))
## What Businesses Should Do
- **Update systems** now to track and categorize eligible remittance transfers—important for identifying transactions subject to the 1% tax.
- **Set up procedures** to make semimonthly deposits starting Jan. 2026. Even if calculations are off initially, timely deposits matter under relief.
- **Prepare for Form 720 filings**, quarterly reporting on remittance transfer tax. Ensure accounting aligns with the new obligation.
- **Document reasonable cause** in case penalties later apply—maintain records of deposits, calculations, and corrective actions.
## Practical Example
A money transfer service, SafeSend Co., receives cash for remittance transfers. They anticipate collecting tax starting Jan 1, 2026, but their system doesn’t yet distinguish cash-based transfers. Under Notice 2025-55:
- If they deposit by due dates in Q1-Q3 2026—even with flawed calculation—they won’t face penalties for deposit failure.
- They must pay any underpayment by the Form 720 deadline each quarter.
Thus SafeSend gains time to update accounting systems while remaining compliant.
## Risks and Long-Term Considerations
- After Q3 2026, full compliance applies: penalties may be enforced for miscalculations or late deposits.
- Safe harbor rules may expire or tighten; monitoring regulatory updates is critical.
- Businesses must also ensure they don’t wrongly classify instruments or misinterpret what constitutes a “physical instrument.”
## Summary
OBBB’s remittance transfer tax introduces a significant compliance obligation. However, the early-year relief provides breathing room. To make the most of this transition: assess internal controls now, ensure timely (even if imperfect) deposits, and document your determinations. Though relief reduces near-term risk, full accuracy will be essential from Q4 2026 onward.