What is the Remittance Transfer Tax?
Under the provisions of the One, Big, Beautiful Bill, beginning January 1, 2026, a 1% remittance transfer tax applies to remittances sent from the U.S. to foreign recipients when the sender uses physical instruments like cash, money orders, or cashier’s checks. (irs.gov)
Who Pays & Reporting Rules
- The sender is responsible, but remittance transfer providers must collect the tax from senders for certain payments. If they fail, the liability shifts to the provider. (irs.gov)
- Providers must begin semimonthly deposits and file returns quarterly using Form 720 (Federal Excise Tax Return). The first deposits were due Jan. 29, 2026. (irs.gov)
Key Proposed Rule Clarifications
The IRS and Treasury issued proposed regulations defining:
- what constitutes a “physical instrument” triggering the excise tax,
- specific obligations for both senders and providers,
- and illustrative examples showing how tax applies in various common situations. (irs.gov)
Examples to Illustrate Application
- If Daisy sends $1,000 in cash to a family member overseas using a money order, the sender (Daisy) owes 1%, i.e. $10 excise tax.
- If Provider Co accepts cashier’s check as part of a remittance, it must collect the 1% from Daisy, deposit semimonthly, and report on Form 720.
- If a hardwood gift costs more than average transport costs and uses a wire transfer, it likely escapes the tax—because wire transfers are non-physical.
What’s Still in Proposal
These regulations are proposed, not yet finalized. Stakeholders have until June 12, 2026 to comment. (irs.gov)
Action Steps for Stakeholders
- Remittance providers must review policies to track physical instruments, prepare systems to collect and deposit tax properly.
- Individuals against sending money via physical instruments may consider digital alternatives (wire, bank transfer) to avoid the 1% tax.
- Seek professional advice for large or regular remittance transfers to understand total cost including any tax liability.
Bottom Line
This excise tax will affect many sending remittances abroad via physical means starting in 2026. For anyone using these services—even occasionally—it’s crucial to know the rules, report correctly, and consider digital alternatives to avoid unnecessary costs.