Compliance
Remittance Transfer Providers: Penalty Relief Comes with Strings Attached
As OBBB introduces a new excise tax on certain remittance transfers, the IRS is offering limited penalty relief for 2026—but only if providers meet tight conditions.
By NomadicTax Research Team • 5-8 min read • November 16, 2025
## New excise tax under OBBB: what it is
- Starting **January 1, 2026**, a **1% excise tax** is imposed on certain remittance transfers where senders use **cash, money orders, cashier’s checks, or similar physical instruments**. ([irs.gov](https://www.irs.gov/irb/2025-43_IRB?utm_source=openai))
- The sender is responsible for the tax, but the remittance transfer provider must **collect and remit** the tax to the IRS via Form 720 quarterly, and make **semimonthly deposits**. ([irs.gov](https://www.irs.gov/irb/2025-43_IRB?utm_source=openai))
## What relief is being offered
- **Notice 2025-55** grants relief from **failure-to-deposit penalties** for the **first three quarters of 2026**, if:
- The provider **makes semimonthly deposits on time**, even if computed incorrectly.
- The provider **pays any underpayment** by the due date of the **quarterly Form 720**. ([irs.gov](https://www.irs.gov/irb/2025-43_IRB?utm_source=openai))
- Risk of penalties remains if there’s **willful neglect**, or deposits are late. “Reasonable cause” standard still applies. ([irs.gov](https://www.irs.gov/irb/2025-43_IRB?utm_source=openai))
## Implications for remittance businesses
- Must set up infrastructure to collect and remit the new excise tax by early 2026.
- Must monitor payment methods of senders: only physical instruments trigger the tax. Electronic methods (ACH, credit card) are excluded. ([irs.gov](https://www.irs.gov/irb/2025-43_IRB?utm_source=openai))
## Example scenario
- **Company A** processes remittances in early 2026. Over a 15-day period, remittance transfer providers using physical instruments collect remittances totaling $100,000. They’re supposed to deposit 1% tax ($1,000) semimonthly by Jan 29, 2026.
- If they miss correct calculation but deposit $900 on time, and later pay the $100 shortfall when filing Form 720, they’re protected from deposit penalties under Notice 2025-55. ([irs.gov](https://www.irs.gov/irb/2025-43_IRB?utm_source=openai))
- But if deposits are late, penalties apply unless reasonable cause is shown.
## Action steps for providers
- Update tracking systems to flag when payments are made via qualifying physical instruments.
- Train staff or platform partners on categorizing payments correctly.
- Prepare for the first deposit due on **Jan 29, 2026** for semimonthly periods. Ensure calendar reminders etc. are in place.
- Consult legal / tax counsel to ensure compliance and documentation of steps taken.