Remittance Tax Guidance Implications for Money Services and Global Mobility

The IRS released proposed regulations on April 10, 2026 that provide favorable guidance on the new 1% excise tax on remittance transfers. Under the IRS’s narrow interpretation of the statute, the tax will largely affect money service businesses while sparing many banks, credit unions, and electronic payment processors. There may also be implications for global mobility programs.

The excise tax on remittance transfers was created by the One Big Beautiful Bill Act and became effective for transfers beginning on January 1, 2026. It imposes a 1% excise tax on remittance transfers from U.S. senders to foreign recipients when the sender provides cash, a money order, a cashier’s check, or other similar physical instrument (as provided by the Secretary) to the remittance transfer provider.

The regulations generally rely on the Electronic Fund Transfer Act for definitions of terms such as “remittance transfer,” “remittance transfer provider,” and “sender.”

Applicable Transactions

The proposed regulations add traveler’s checks to the list of cash and “similar physical instruments” to which the excise tax applies. The regulations further provide that this list of cash, money orders, cashier’s checks, and traveler’s checks is exclusive, meaning the tax will not apply to transfers funded with digital assets, bank accounts, business checks, personal checks, prepaid cards, or debit or credit cards (including cards issued outside the U.S.). Further, the guidance clarifies that the tax will not apply to ACH transfers or transfers made through an electronic payment platform (if it is not funded by physical cash). Under the proposed regulations, the remittance transfer tax also does not apply to small-value transactions of $15 or less.

The proposed regulations contain a broad anti-abuse rule that can collapse transactions meant to circumvent the remittance transfer tax. For instance, if a customer provides $500 in cash to a remittance transfer provider for a general use prepaid card and immediately uses the card to initiate a remittance transfer, the IRS said it could recharacterize the transactions as a remittance transfer of cash.

It should be noted that U.S. citizens and residents are not exempt from the transfer tax. The tax applies to all individuals, including nonresident aliens, who transfer cash to a recipient located outside the U.S., with no relief available under U.S. income tax treaties. Individuals in client mobility programs who rely on cash-based payment methods will face a new transaction cost. In addition, mobile workers and students with lawful U.S. status who lack access to qualifying U.S. financial accounts or U.S.-issued debit or credit cards may incur the excise tax on outbound remittance transfers, including transfers to non-U.S. personal accounts or family members abroad.

Amount of Tax

The 1% tax is calculated using the amount transferred to the designated recipient, including any promotional bonuses not directly paid for by the sender. Service charges, taxes, and any other amounts not transferred to the recipient are excluded. 

The tax is imposed when the transfer is made, at the earlier of when the transfer provider initiates the transfer or the sender pays the transfer provider. If the transfer provider fails to collect the tax from the sender, the provider is liable for the tax.

Payment and Reporting

Transfer providers must generally make semi-monthly tax deposits of tax and then report the quarterly liability on Form 720. Notice 2025-55 provides relief from failure to deposit penalties for the first three quarters of 2026 if the transfer provider makes timely deposits (even if inaccurate) and then pays the correct amount by the Form 720 due date.