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USAEXCISE TAX
The 1% remittance transfer tax: what businesses and providers need to know
Since 1 January 2026, cash-funded remittances sent from the US carry a 1% federal excise tax. The IRS has now extended deposit-penalty relief for providers until final regulations apply.
By the True CPA Tax TeamNovember 4, 20262 min read
The tax was created by the One Big Beautiful Bill Act (section 4475). It matters to money transmitters, retailers that act as agents, and businesses that serve Latin American communities in the US. Most bank-funded transfers are outside its scope, so the funding method decides everything.
How the tax works
Rate: 1% of the remittance transfer, payable by the sender.
Who collects: the remittance transfer provider collects the tax, deposits it semimonthly and files Form 720 quarterly.
What is taxed: transfers funded with cash, a money order, a cashier’s check or a similar physical instrument.
What is not taxed: transfers funded from an account at a qualifying US financial institution, or with a US-issued debit or credit card.
Latest guidance
Proposed regulations (REG-114499-25, April 2026): would exclude transfers of $15 or less and certain securities or commodities purchases, and add an anti-abuse rule. They would apply once final, with optional reliance for transfers after 31 December 2025.
Notice 2025-55: gave penalty relief for the first three quarters of 2026 if deposits were timely and any underpayment was paid by the Form 720 due date.
Notice 2026-52: extends that relief to semimonthly periods ending before final section 4475 regulations apply.
What to do now
01Confirm whether your business acts as a remittance transfer provider or as its agent.
02Separate cash-funded transfers from bank- and card-funded transfers in your systems.
03Review semimonthly deposit calculations and Form 720 filings for 2026.
04Pay any quarterly underpayment by the Form 720 due date to keep the relief.
05Track the final regulations and adjust procedures when they apply.
Watch out: the relief covers failure-to-deposit penalties only if the provider meets its conditions. It does not reduce the tax itself.
HOW TRUE CPA CAN HELPTrue CPA reviews whether the tax applies, sets up deposit and Form 720 routines and supports money service businesses and their agents with federal excise compliance.Talk to a specialist
Legal basisInternal Revenue Code section 4475 (added by the One Big Beautiful Bill Act, Public Law 119-21); proposed regulations REG-114499-25; Notice 2025-55; Notice 2026-52.SourcesIRS — Notice 2026-52IRS — One Big Beautiful Bill provisions (Working Families Tax Cuts)KPMG — Proposed regulations: excise tax on remittance transfers (April 2026)Accounting Today — IRS gives deposit relief for remittance transfer providers (Oct 2025)This content is for information only and does not replace an analysis of each specific case.
