Compliance
What Businesses Need to Know: Remittance Transfer Tax & Relief Provisions from 2026
Starting January 1, 2026, a new 1% excise tax on certain remittance transfers kicks in—here’s how providers can comply and leverage penalty relief offered by the IRS under Notice 2025-55.
By NomadicTax Research Team • 5-8 min read • November 15, 2025
## Overview: Remittance Transfer Tax Under OBBB Acts
Beginning **January 1, 2026**, Section 4475—added by the One, Big, Beautiful Bill Act—imposes a **1% excise tax** on certain remittance transfers made using **cash, money orders, cashier’s checks, or similar physical instruments** when sent from the U.S. to a foreign country. ([irs.gov](https://www.irs.gov/irb/2025-43_IRB?utm_source=openai))
Remittance transfer providers will be responsible for:
- Collecting tax from senders,
- Filing **quarterly returns** via **Form 720**,
- Making **semimonthly deposits** of these taxes.
The first deposit is due on **January 29, 2026**. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-penalty-relief-for-remittance-transfer-providers-who-fail-to-deposit-excise-tax-under-the-one-big-beautiful-bill?utm_source=openai))
## Penalty Relief via Notice 2025-55
To ease the transition burden, the IRS and Treasury are granting **limited penalty relief** for failures to deposit properly during the **first three calendar quarters of 2026**, under Notice 2025-55. Providers may avoid failure-to-deposit penalties if they:
- Make **timely deposits**, even if the calculated amount is wrong, and
- Pay any underpayment **in full** by the due date of Form 720 for each quarter. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-penalty-relief-for-remittance-transfer-providers-who-fail-to-deposit-excise-tax-under-the-one-big-beautiful-bill?utm_source=openai))
Providers may also use the **deposit safe harbor** under Treas. Reg. § 40.6302(c)-1(b)(2), even if there's underpayment, provided they satisfy the **reasonable cause standard**. ([irs.gov](https://www.irs.gov/irb/2025-43_IRB?utm_source=openai))
## Compliance Checklist for Providers
1. Review whether your operations qualify as “remittance transfer provider” under Section 4475.
2. Update systems to **collect and track** physical remittance transfer information. Cash, money-orders, etc. must be documented.
3. Prepare for semimonthly deposit schedule starting Jan. 29, 2026.
4. File Form 720 quarterly showing gross amounts and tax liabilities.
5. If mistakes happen in early quarters, ensure you correct underpayments by quarter deadline to avoid penalties.
## Impact & Strategic Considerations
- Providers of international money transfers (e.g., money service businesses, remittance companies) will bear new administrative and compliance costs.
- The relief doesn’t cover all mistakes: **late deposits** or **failure to remit full tax** by Form 720 due dates could still trigger penalties.
- Careful tracking of eligible remittances is crucial: only physical-instrument remittances are taxed under Section 4475. Many financial transfers (bank wires, cards) are NOT subject.
- Companies should train staff, especially in customer service and compliance, to manage the new tax collection duties.
## Example Scenario
*Acme Remit Co.* handles cash remittances monthly. In Q1 2026, they calculated tax incorrectly (underpaid). However, they made their first deposit within the required timeframe. By the due date of the Form 720 return, they remedied the shortfall. Under Notice 2025-55, **no failure-to-deposit penalty** will be assessed for that quarter, assuming “reasonable cause” applies.
## Action Steps Before Year End
- Determine whether your company is covered under Section 4475.
- Set up processes to **collect sender information** and the relevant physical remittance types.
- Update financial software for semimonthly deposits and quarterly return filing.
- Consult tax counsel for your state registration, as state-level remittance rules may also exist.
This new excise tax and the accompanying relief aim to balance administrative burden with compliance—if you act early, you’ll minimize risks and unexpected costs.