Overview of the Remittance Transfer Tax
As part of the OBBB Act enacted July 4, 2025, Section 4475 introduces a new 1% tax on certain remittance transfers made with cash, money orders, cashier’s checks, or similar physical instruments. Providers must collect this from senders and remit it under Form 720. The law takes effect January 1, 2026. (irs.gov)
Penalty Relief — What Notice 2025-55 Offers
The IRS and Treasury have issued Notice 2025-55 granting deposit penalty relief for failures to correctly deposit remittance transfer tax for the first, second, and third calendar quarters of 2026. If providers:
- Make deposits on time, even with calculation errors, and
- Pay the underpayment in full by the due date of the quarterly Form 720,
then penalties under IRC § 6656 will be waived. Safe harbor provisions remain intact if certain standards are satisfied. (irs.gov)
Key Deadlines You Must Know
| Requirement | Due Date |
|---|---|
| Effective date of remittance transfer tax | January 1, 2026 (irs.gov) |
| First semimonthly deposit due | January 29, 2026 (irs.gov) |
| Deposit penalty relief period | Q1–Q3 of 2026 (irs.gov) |
| Full underpayment payment | By due date of corresponding Form 720 for each quarter (irs.gov) |
What Providers Should Do to Prepare Now
- Update systems to collect remittance tax from senders when required payment types are used.
- Track remittance amounts carefully to estimate tax owed.
- Establish bookkeeping to support semimonthly deposits and quarterly reporting via Form 720.
- Train staff or vendors on which kinds of transactions trigger the tax.
- Consider consulting tax counsel or compliance experts to avoid misclassification or errors that fall outside the relief window.
Example Scenario
A remittance provider handles money orders, cash, and digital payments. Some transactions involve cash or money orders—these will be taxed starting in 2026. If, by Q1 2026, they undercompute how much tax they owe in January but deposit something by Jan 29, and make up the difference by the end of Q1’s Form 720 filing deadline, they avoid penalties—per Notice 2025-55. But after Q3, penalties apply if failures persist.
Risks After Relief Ends
From Q4 2026 onward, missing deposits or miscalculations won't be covered by relief. Providers must fully comply or risk substantial penalties. Ensuring accurate systems is essential.
Category: Entity Setup | taxHome: US | author: NomadicTax Research Team | readTime: 5-8 min