Compliance
Remittance Transfers Under the Radar: New 1% Excise Tax & What MSBs Must Know
Learn about the remittance transfer tax launched as of Jan 1, 2026—who pays it, instruments that trigger tax, and what providers must do to stay compliant under recent proposed IRS regulations.
By NomadicTax Research Team • 5-8 min read • June 5, 2026
## What Is the Remittance Transfer Tax & Its Origin
The **One, Big, Beautiful Bill Act** introduced a **1% excise tax** on remittance transfers sent from the U.S. **beginning January 1, 2026**. The sender is liable when using certain physical funding instruments—cash, money orders, cashier’s checks, or similar tools. Digital transfers funded from bank accounts, debit or U.S. credit cards are generally excluded. ([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))
## Who Is Affected
- **Senders** using taxable instruments listed above are responsible for paying the tax. If sender doesn’t pay, the **remittance transfer provider (MSB or agent)** becomes liable. ([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))
- Providers must collect the tax, **make semimonthly deposits**, and file **quarterly returns** using **Form 720**. ([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))
## Payment Instruments That Trigger the Tax
- Triggers include cash, money orders, cashier’s checks, *traveler’s checks*, or other instruments similar in form. ([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))
- Checks not on that list unless they are cashed by a remittance transfer provider and the funds used to initiate the transfer; then the tax applies as if **cash** was used. ([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))
## Base & Attachments Timing
- The **tax base** is the amount sent to the designated recipient. Excise tax doesn’t include fees or taxes not ultimately transferred. However, any **promotional bonus** sent by the provider to the recipient *is* included. ([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))
- The tax **attaches** at the earlier of initiation of transfer by provider or when sender pays the provider/agent. Even canceled or expired transfers may allow a **refund claim**. ([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))
## Compliance & Deadlines
- Providers must deposit remittance transfer tax **semimonthly**, file **Form 720 quarterly**. First semimonthly deposit was due **January 29, 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))
- IRS issued **Notice 2025-55** offering limited **penalty relief** for failures by providers during the first three quarters of 2026—provided reasonable cause is shown. ([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 (REG-114499-25) were released April 10, 2026. Public comments 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))
## Practical Scenarios
**Scenario 1:** Sender pays $1,000 cash at a money service business using cash to send to a foreign recipient. Service fee is $20, state tax $10. The $1% tax is imposed on the **$1,000** sent amount. Fee and tax borne by provider or included elsewhere. Sender should pay $10 extra ($1,000 × 1%).
**Scenario 2:** Sender uses a personal check. The provider cashes it and uses funds to send the remittance. Now, under the regulation, it’s treated like cash, and tax attaches. So same obligations apply.
## Risk & Strategy
- Providers & MSBs must update policies to track which funding instruments trigger tax.
- Systems needed to report properly on Form 720, correctly document transactions that may appear non-taxable at first glance.
- Senders should ask providers how transfers are funded to understand if tax applies.
- Keep clear records: proof of instrument type, whether service was canceled, fees/bonuses.
## Key Takeaway
The remittance transfer tax adds a layer of complexity for cross-border transfers. Knowing which instruments trigger it, how the tax attaches, and who bears responsibility helps both senders and providers stay compliant and avoid unexpected liabilities.