Tax Planning
Planning Remittances Under the New U.S. Remittance Transfer Tax
With the 1% remittance transfer tax now in effect, individuals and businesses sending funds abroad using cash-like instruments need fresh planning strategies to avoid unnecessary tax costs.
By NomadicTax Research Team • 5-8 min read • May 27, 2026
## Understanding the Remittance Transfer Tax
The One, Big, Beautiful Bill (OBBB) introduced a **1% excise tax** on remittances sent from the U.S. to foreign recipients when the sender uses **cash, money orders, cashier’s checks, or similar physical instruments**. The sender owes this tax, and providers collecting it must report and remit it via **Form 720**, with semimonthly deposits and quarterly filings. ([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 clarify key definitions and rules in REG-114499-25, particularly around what qualifies as a triggering instrument and how the excise tax base is determined. Comments on the proposal are due by **June 12, 2026**. ([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))
## Key Planning Strategies
| Strategy | Action Steps | Benefit |
|---|---|---|
| **Use non-taxable funding instruments** | Prefer debit cards, credit cards, ACH transfers, or bank-issued transfers instead of cash or physical instruments. | Avoids triggering the tax entirely. |
| **Beware of check-cashing loops** | When a provider cashes a personal or business check for you and then sends a remittance funded with that cash, it’s treated as if you used cash. ([irs.gov](https://www.irs.gov/irb/2026-18_IRB?utm_source=openai)) | Recognize hidden triggers and adjust how funds are handled. |
| **Manage timing around rules implementation** | Although the tax is effective starting **Jan 1, 2026**, final regulations are still to be published. Pending that, entities may rely on the proposed regulations. ([irs.gov](https://www.irs.gov/irb/2026-18_IRB?utm_source=openai)) | Reduces surprise liabilities. |
| **Monitor provider obligations** | Remittance transfer providers must collect from senders when required, deposit tax semimonthly, and file reports quarterly. | Avoid penalties or compliance issues for providers. |
## Practical Examples
- *Maria wants to send $1,000 to her family abroad.* If she pays via cash into a money order, she'll owe **$10** in remittance tax. If she pays by debit card directly from her bank, no tax is owed.
- *A business issues a promotion that provides a bonus in the remittance to the recipient.* Bonuses count in the tax base. If $1,000 is sent + a $5 bonus, the tax is $10.05. Fees and state taxes are excluded. ([irs.gov](https://www.irs.gov/irb/2026-18_IRB?utm_source=openai))
## What Recipients and Providers Should Do Now
- **Senders**: Check payment method. When possible, avoid funding with physical instruments. Document when funds are sent via non-physical methods.
- **Providers**: Ensure systems can identify triggering instruments; adjust reporting workflows; train staff about check-cashing and bonus payments eligibility.
## Implications & Pitfalls to Watch
- **Accessibility**: People with limited bank access may rely on physical instruments—these communities may be disproportionally impacted.
- **Dual costs**: The 1% excise adds to existing transfer fees, potentially making remittances significantly more expensive.
- **Regulation changes**: Final regulations may alter definitions or exclusions—stay aware.