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Sending money abroad is a common task for many — whether paying a supplier, covering tuition, or supporting family. Until now, the cost was limited to standard transfer fees. But starting January 1, 2026, a 1% remittance tax will apply to certain cross-border cash transfers. This new levy, part of the One Big Beautiful Bill Act, applies when you send cash, money orders, or cashier’s checks through a remittance service. The tax is collected by your bank or transfer provider and reported on Form 720.

In this guide, we'll break down who this tax affects, how it works, and how to prepare for compliance.

The IRS remittance tax is a new federal excise tax created by Section 4475 of the One Big Beautiful Bill Act. It imposes a 1% tax on certain money transfers sent from the U.S. to foreign recipients starting January 1, 2026.

This tax doesn't apply to income or profits. It applies when sending cash, money orders, or cashier's checks abroad through a bank or remittance service. The sender bears the cost, and the remittance provider collects and reports it to the IRS using Form 720.

• Excluded Transfers: Electronic transfers like ACH, wire, or card-based payments aren’t taxed.

• Money Flowing Into the U.S. is Not Taxed.

The remittance tax mainly impacts those using cash-based transfer methods. Here’s who will be affected:

• Individuals: Anyone using cash, money orders, or cashier’s checks for money transfers will see the 1% fee.

• Small Businesses: Businesses paying vendors or contractors in cash will be subject to the tax if using money orders or cashier’s checks.

• Remittance Providers: These entities are responsible for collecting and reporting the tax via Form 720.

• Exclusions: The tax does not apply to digital or card-based transfers, nor to recipients outside the U.S.

Starting January 1, 2026, a 1% excise tax will apply to eligible remittances. Here’s how it works:

1. You send cash, a money order, or cashier’s check abroad.

2. The remittance service collects the 1% tax when the transaction happens.

3. The provider remits the tax to the U.S. Treasury and reports it quarterly on Form 720.

4. Exclusions: Transfers via bank accounts or debit/credit cards are exempt from the tax.

Tax Example:

The remittance tax starts January 1, 2026. From then, all qualifying money transfers using cash, money orders, or cashier’s checks will include the 1% tax.

Quarterly Filing Deadlines:

• Q1 (Jan-Mar): File by April 30, 2026

• Q2 (Apr-Jun): File by July 31, 2026

• Q3 (Jul-Sep): File by Oct 31, 2026

• Q4 (Oct-Dec): File by Jan 31, 2027

The 1% remittance tax could impact your business’s payment processes and increase transaction costs. Here’s how:

• Higher Transaction Costs: If you send cash, money orders, or checks, the tax adds to your total expense.

• More Work for Providers: Remittance services must collect and report this tax quarterly.

• Shift Toward Digital Transfers: As the tax doesn’t apply to digital methods, businesses may prefer ACH or card-based transfers to avoid the fee.

• Impact on Small Businesses: Those still relying on cash remittances will need to adjust their processes for compliance.

Even though the tax starts in 2026, early preparation can help you avoid delays. Here's what you can do now:

1. Review Your Payment Methods: If you use cash, money orders, or cashier’s checks, assess where the tax applies.

2. Shift to Digital Transfers: Consider using ACH or card-based payments to avoid the tax.

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3. Talk to Your Provider: Confirm with your bank or remittance partner how they’ll handle the tax.

4. Update Your Records: Ensure your accounting systems can track the tax for reporting on Form 720.

5. Set Deadlines: Mark quarterly Form 720 deadlines on your calendar.

6. Inform Your Team: Make sure everyone involved in financial operations understands the change.

1. Does everyone have to pay the tax?
   No, only cash-based transfers are taxed. Digital and card-based payments are exempt.

2. Who collects the tax?
   The remittance provider collects the tax at the time of transfer and reports it to the IRS.

3. What about incoming transfers?
   Only transfers leaving the U.S. are taxed. Incoming funds are not affected.

4. How much is the tax?
   The rate is 1% of the amount transferred. For example, a $2,000 transfer costs an extra $20 in tax.

5. Can I avoid the tax?
   Yes, by switching to digital transfers like ACH, debit, or credit card payments.

6. What if the provider doesn’t collect the tax?
   The provider may be liable for the uncollected tax and face penalties.

The 1% remittance tax is coming in 2026, but early preparation can make compliance simple:

1. Review your transfers to check where the tax applies.

2. Shift to digital payments to avoid the tax.

3. Update your accounting systems to track Form 720 filings.

4. Talk to your provider to ensure they’re prepared.

5. Stay informed about IRS updates in 2025.

By taking these steps now, you’ll be ready to comply with minimal disruption.

The 1% remittance tax is a small change that requires some adjustments. But with early preparation, it won’t be a disruption. Take time to review your processes, update your systems, and inform your team so you can file smoothly when the rule takes effect in 2026. Compliance doesn’t have to be stressful — a little preparation now will save you time later.

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