Compliance
Understanding the New Remittance Transfer Tax & Penalties Relief
Starting in 2026 the U.S. is implementing a 1% excise tax on certain remittance transfers—and IRS is providing transitional relief from deposit penalties.
By NomadicTax Research Team • 5-8 min read • November 17, 2025
## What Is the Remittance Transfer Tax?
The **One, Big, Beautiful Bill Act** creates a 1% excise tax under section 4475 on *certain remittance transfers* made using cash, money orders, cashier’s checks, or other similar physical instruments.([irs.gov](https://www.irs.gov/irb/2025-30_IRB?utm_source=openai)) It does **not** apply to electronic transfers. With the new law, providers (not senders) are responsible for reporting, collecting, and remitting this tax quarterly via Form 720. Semimonthly deposits will also be required. The tax becomes effective January 1, 2026.([irs.gov](https://www.irs.gov/irb/2025-30_IRB?utm_source=openai))
## Penalties Relief: What IRS Notice 2025-55 Offers
Recognizing that implementation will be challenging, IRS Notice 2025-55 provides relief from penalties for remittance transfer providers for the **first three calendar quarters of 2026**. The relief covers two specific situations: that providers make timely deposits, even if they miscalculate amounts, and pay full underpaid amounts by the due date of Form 720.([irs.gov](https://www.irs.gov/irb/2025-30_IRB?utm_source=openai))
Also, the ability to use the **deposit safe harbor** in IRC § 40.6302(c)-1(b)(2) is preserved during that transition period, provided the provider meets “reasonable cause” standards.([irs.gov](https://www.irs.gov/irb/2025-30_IRB?utm_source=openai))
## Compliance Tactics for Providers
- **Plan for new reporting cycles**: Starting early 2026, set up systems to collect information about transfers using applicable instruments—cash, checks, etc.
- **Semimonthly deposits**: Even though penalties are temporarily relieved, ensure deposits are made timely. Building this habit protects you long term.([irs.gov](https://www.irs.gov/irb/2025-30_IRB?utm_source=openai))
- **Safe harbor rule prep**: Because safe harbor applies, maintain accurate look-back records so you can use the safe harbor method when it’s applicable (by Q3 2026).([irs.gov](https://www.irs.gov/irb/2025-30_IRB?utm_source=openai))
- **Engage tax advisors early**: There’s complexity in determining thresholds, fine-printing on “physical instruments,” and geographic jurisdiction. Early consultation helps avoid surprises.
## Example Scenario
A remittance company handles 100 transfers per month in 2026 using physical instruments. Due semimonthly deposits start January 29, 2026. Suppose in Q1 they miscalculate taxes slightly: if they still **deposit on time** and **pay underpaid amounts by the Q1 Form 720 due date**, the IRS won’t impose penalties under section 6656.([irs.gov](https://www.irs.gov/irb/2025-30_IRB?utm_source=openai))
## What Providers Should Do Now
- Update internal compliance and accounting systems to flag remittances meeting the physical-instrument requirement.
- Train staff to distinguish cash or check transfers vs purely electronic ones.
- Set up alerts for Form 720 deadlines and deposit due dates.
- Consider a test run for Q1 to ensure workflows are in place.
**Bottom line**: The remittance transfer tax represents a new liability for many businesses. That said, the IRS is offering a grace period of sorts for penalties—take advantage by getting ready early, paying on time, and keeping your records solid.