Compliance
Navigating New Penalty Relief for Remittance Transfer Providers Under OBBB
A key change under the One, Big, Beautiful Bill grants remittance transfer providers leeway on penalties for 2026 — and understanding it now can help avoid compliance missteps.
By NomadicTax Research Team • 5-8 min read • November 18, 2025
## What Is the Remittance Transfer Tax?
Effective **January 1, 2026**, the One, Big, Beautiful Bill (OBBB) imposes a **1% excise tax** on certain remittance transfers under IRC section 4475. If you’re a remittance transfer provider (RTP) collecting transfers via cash, money order, cashier’s check, or similar physical instruments from U.S. senders to recipients abroad, you will need to collect and remit this tax via **Form 720**, file quarterly, and make semimonthly deposits. ([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))
## Notice 2025-55: Limited Penalty Relief
To aid transition, the IRS and Treasury issued **Notice 2025-55**, granting limited relief from failure to deposit penalties (section 6656) for the **first three calendar quarters of 2026**. Under the notice:
- You must **make timely deposits** of the remittance transfer tax, even if the amount is calculated incorrectly.
- Any underpayment for each quarter must be **paid in full by the due date** of the corresponding Form 720.
- You must satisfy the **reasonable cause standard**—that is, show the failure was due to reasonable cause, not willful neglect.
Also, using the standard **deposit safe harbor** rules (§ 40.6302(c)-1(b)(2)) will not be affected by initial deposit calculation errors, provided you meet the regulatory requirements. ([irs.gov](https://www.irs.gov/irb/2025-43_IRB?utm_source=openai))
## What Providers Need to Do Before 2026 Arrives
- **Update internal systems** to flag and classify remittance transfers covered by new law (cash, money orders, checks).
- Ensure staff and operations understand collection, deposit, and reporting deadlines.
- Maintain strong documentation to satisfy “reasonable cause” if any missteps occur.
- Plan cash flows so required deposits and reconciliations can be made semimonthly when required.
## Example Scenario
Let’s say a money transfer business transfers $100,000 in sums via physical instruments during Quarter 2 of 2026. They miscalculate deposits for April and May and underpay by $500 total, but:
- They made deposits on time (albeit incorrect sums), and
- They pay the full $500 underpayment by the deadline of Form 720 for Q2 (i.e., July 31, 2026).
Under Notice 2025-55, they can avoid the penalties under section 6656 for late or insufficient deposits for Q2 if they also satisfy reasonable cause.
## Why It Matters to Digital Nomads, Small Businesses & NGOs
If you send money yourself from abroad via cash or check, or use small remittance providers, those entities must follow these rules. International freelancers, students sending money home, or small nonprofits paying foreign vendors should check whether the provider is compliant (or whether remittances may carry 1% tax).
## Risks & Not Yet Confirmed Areas
- “Reasonable cause” is a **case-by-case standard**—you must be able to explain defects in your system or good faith efforts.
- The relief **only covers the first three quarters** of 2026. From Q4 onward, full penalties may apply.
- Exclusions apply: transfers via electronic or regulated banking channels under certain rules may be exempt—these must be reviewed carefully.
## Practical Checklist Before Jan 1, 2026
1. Classify your transactions that meet the law’s definition of reportable remittance transfers.
2. Compute example deposits for January to see system gaps.
3. Train staff to collect sender information and tax at point of remittance.
4. Budget to cover potential underpayments that will need to be made by quarterly return due dates.
5. Review contracts or agreements with providers you rely on to ensure compliance.