Compliance
Penalty Relief for Remittance Providers: What Businesses Need to Know Beginning 2026
The IRS is offering relief from certain penalties for early missteps under the new remittance transfer tax—this will be crucial for providers navigating new reporting requirements.
By NomadicTax Research Team • 5-8 min read • November 23, 2025
## Overview of the New Remittance Transfer Tax
Under Section 4475 of the Internal Revenue Code—enacted by the OBBB Act—certain remittance transfer providers will be subject to a **1% excise tax** on certain remittance transfers made after **December 31, 2025**. This applies when the sender uses cash, money orders, cashier’s checks, or similar instruments. ([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))
Key operational changes for providers:
- **Semimonthly deposit** of taxes beginning January 2026; first due date is **January 29, 2026**. ([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))
- **Quarterly reporting** via 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))
- Providers must start collecting the tax from senders for qualifying transactions. ([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))
## Penalty Relief (Notice 2025-55)
To ease the transition, Treasury and the IRS issued guidance offering relief from failure to deposit penalties under Section 6656 in the **first three calendar quarters of 2026**, if providers:
1. **Make timely deposits**, even if the amounts are calculated incorrectly, and
2. **Pay any underpayment** of the tax by the due date of the quarterly 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))
Additionally, providers won’t lose the ability to use the **deposit safe harbor** under the Excise Tax Procedural Regulations due to early-period errors, so long as they satisfy the reasonable cause standard. ([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))
## Practical Takeaways for Remittance Transfer Providers
- **System setup**: Update internal accounting and payment systems before January 1, 2026.
- **Education and training**: Make sure staff handling remittance transactions understand which transfers are taxable and how to collect between senders.
- **Timely deposits**: Even if uncertain of the exact amount, deposit on time to avoid penalties.
- **Estimate now, adjust later**: Use early transactions to refine your projections but prioritize accurate reporting once data is available.
## Example Scenario
A remittance provider makes multiple transfers using cashier’s checks in January – they collect amounts but miscalculate the excise tax rate. They still:
- Deposit an estimated amount on January 29, 2026,
- Continue depositing in semimonthly intervals, and
- On April 30, 2026, file the Form 720 and pay any shortfall.
Because they deposited timely (even if under), and paid any underpayment by the Form 720 due date, they’re **protected from penalty under Section 6656** for first three quarters. ([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))
## Timeline Chart
| Date | Requirement |
|---|---|
| January 1, 2026 | Remittance transfer tax effective date |
| Jan 29, 2026 | First semimonthly deposit due |
| End of each semimonthly period (Q1-Q3 2026) | Deposit tax; errors okay for relief so long as underpayments paid quarterly |
| Quarterly | File Form 720 and pay full tax due for each quarter |
Failing to meet both conditions after September 30, 2026, exposes providers to standard penalties. Make compliance processes ready well in advance.