The U.S. Department of the Treasury and the Internal Revenue Service (IRS) have issued new guidance providing temporary penalty relief for remittance transfer providers who may fail to make required deposits of the new excise tax introduced under the One Big Beautiful Bill Act (OBBBA).
This update is detailed in the IRS Newsroom release (October 2025) and Notice 2025-55 (PDF).
Key Takeaways
- A new 1 percent excise tax on covered remittance transfers begins January 1, 2026.
- Penalty relief is available for the first three quarters of 2026 for providers that act in good faith and make timely deposits, even if the deposit amount is miscalculated.
- Any underpayment must be paid in full by the Form 720 due date for that quarter to qualify for relief.
- Full compliance—including accurate deposits and reporting—will be required beginning fourth quarter 2026.
- Individuals sending money abroad may see small fee changes as providers adjust to account for the new tax.
Background
Beginning January 1, 2026, a 1 percent excise tax will apply to certain remittance transfers initiated in the United States and sent to recipients outside the country.
Under Section 4475 of the Internal Revenue Code, added by the OBBBA, the tax applies when senders use cash, money orders, cashier’s checks, or similar physical instruments to fund a transfer handled by a remittance-transfer provider.
Providers will be responsible for:
- Collecting and remitting the 1 percent tax
- Making semimonthly deposits in accordance with Treas. Reg. § 40.6302(c)-1
- Filing quarterly Form 720 (Quarterly Federal Excise Tax Return)
The first semimonthly deposit for the new tax will be due January 29, 2026.
Penalty Relief for Early Implementation
To assist with the transition to the new tax structure, the IRS has announced temporary penalty relief for the first, second, and third calendar quarters of 2026.
Under Notice 2025-55, remittance transfer providers will not be subject to failure-to-deposit penalties under Section 6656 if they:
- Make deposits on time, even if the amounts are incorrect, and
- Pay any underpayment in full by the Form 720 due date for that quarter
Relief applies only if the provider can demonstrate reasonable cause and acts in good faith to comply.
Starting in the fourth quarter of 2026, full and accurate compliance will be required, and standard penalty provisions will apply.
Who May Be Affected
- Remittance transfer providers, including money transfer businesses, payment service agents, or other financial services handling outbound transfers using cash or similar instruments
- Individuals or small businesses who send funds abroad may see changes in transfer fees as providers adjust for the new excise tax
- Accountants, bookkeepers, and tax advisors should review the new compliance requirements to support affected clients
Conclusion
The IRS penalty-relief period offers remittance transfer providers valuable time to adjust their systems and processes before full enforcement begins in late 2026. Both businesses and individuals involved in cross-border money transfers should stay informed as the new excise tax takes effect.
At The Wisebook, we’re committed to keeping our clients up-to-date on federal tax changes like these. For more insights or compliance support, follow our social media pages or contact our team for assistance.
