IRS Eyes Tax on Your Family's Money Transfers Abroad
Published Date: 4/13/2026
Proposed Rule
Summary
Starting January 1, 2026, certain companies and people who send money transfers to others will face a new excise tax. The IRS is proposing clear rules on who pays this tax and how it works, so everyone knows what to expect. If you’re involved, get ready to follow these new rules and share your thoughts by June 12, 2026!
Analyzed Economic Effects
7 provisions identified: 1 benefits, 4 costs, 2 mixed.
1% Tax on Certain Remittances
Starting January 1, 2026, a 1 percent excise tax applies to certain remittance transfers that occur after December 31, 2025. The tax is paid by the sender, and remittance transfer providers are required to collect and remit the tax quarterly to the IRS.
Providers Must Collect, Deposit, Report
Remittance transfer providers must collect the 1 percent tax from senders and report it on Form 720 (Quarterly Federal Excise Tax Return). Collectors are required to remit the tax quarterly and make semimonthly tax deposits under existing excise procedural rules.
Which Payments Trigger Tax
The tax only applies when a sender funds a remittance with cash, a money order, a cashier's check, a traveler's check, or a similar physical instrument. Remittances funded with a debit card or a credit card issued in the United States, or funded by withdrawals from certain financial institution accounts specified in 31 U.S.C. 5312(a)(2)(A)–(H), are not subject to the tax.
Check-Cashing Treated as Cash Funding
If a remittance transfer provider or its agent cashes a personal or business check payable to the sender and the resulting funds are used to fund the remittance, the transaction is treated as funded with cash and is taxable. Settlement of a money order, cashier's check, or traveler's check by the issuer does not count as a withdrawal that would make the transfer nontaxable.
Safe Harbor Removed for Low-Volume Vendors
The proposed regulations do not adopt Regulation E's safe harbor that deems a person not to be a remittance transfer provider if they provided 500 or fewer remittance transfers in the previous and current calendar years. As a result, low-volume vendors could be treated as remittance transfer providers for tax purposes and face compliance obligations.
Tax Base and Anti‑Avoidance Rules
The taxable amount is the amount that ultimately will be transferred to the designated recipient, which includes promotional bonuses but excludes service fees, State taxes, charges not transferred, and the remittance transfer tax itself. Transactions entered into principally to avoid the tax may be disregarded or recharacterized (for example, issuing general‑use prepaid cards to customers paying with cash can be recharacterized).
Temporary Penalty Relief for 2026 Deposits
Notice 2025-55 provides relief from failure-to-deposit penalties under section 6656 for the first three calendar quarters of 2026 for the remittance transfer tax, provided remittance transfer providers satisfy the reasonable cause exception under section 6656(a).
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Key Dates
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