global Tax New 1% Remittance Tax: What the OBBBA Means for Cross-Border Transfers July 20, 2026 The new 1% remittance tax taking effect in 2026 could reshape how millions of Americans send money abroad and create major compliance headaches for banks, financial companies, and money transfer providers. Here’s what you should know. Quick Takeaways A new 1% remittance tax begins in 2026 for certain money transfers sent physically from the U.S. to foreign recipientsCash-funded transfers are most impacted, including payments made with cash, money orders and cashier’s checks Proposed regulations make exceptions for bank-funded and card-funded transfers, placing more importance on the method of payment Banks, financial companies and transfer providers face new compliance burdens, including tax collection, reporting, and potential liability risks What is the new tax on cross-border remittances beginning in 2026?The One Big Beautiful Bill Act of 2025, signed into law on July 4, 2025, introduces a new 1% excise tax on certain remittance transfers sent from the United States to recipients in foreign countries. The tax is effective for transfers made on or after January 1, 2026, and could impact millions of consumers as well as banks, financial companies and money transfer providers. The Joint Committee on Taxation estimated that the tax will raise nearly $10 billion in federal revenue over the next 10 years.While 1% might not sound significant, the operational and compliance implications could be significant for businesses facilitating international payments.Which transfers are subject to the new tax?The excise tax mainly targets cash-funded remittance transfers. This includes transfers paid for using: cash, money orders, cashier’s checks and similar physical payment methodsIn practice, this means the tax will most commonly impact traditional cash-based international transfers handled through money service businesses, wire transfer companies and certain fintech platforms.Who pays the tax? Legally, the sender is responsible for paying the tax, but the business processing the transfer must collect it at the time of the transaction and send it to the IRS on a quarterly basis on Form 720, Quarterly Federal Excise Tax Return. The first semi-monthly deposit was due January 29, 2026, and the first return on the collections was due April 30, 2026. In October 2025, the IRS issued Notice 2025-55 providing limited penalty relief for remittance transfer providers who failed to deposit the appropriate amount of remittance transfer tax in the first three quarters of 2026.That creates an important compliance issue for companies facilitating cash transfers: if they fail to collect the tax properly and document it accordingly, they could become responsible for paying it themselves. For companies processing large volumes of international transfers, especially across multiple payment channels, that could create risk and administrative complexity.The law applies to more businesses than many expectUnder the Electronic Fund Transfer Act a “remittance transfer provider” is defined as any “person that provides remittance transfers for a consumer in the normal course of its business, regardless of whether the consumer holds an account with such person”. That means the rules could potentially apply to:BanksFintech companies Payment processors Money transfer businesses Specialty finance companies Digital payment platforms Even businesses where customers do not maintain traditional accounts may still fall within the law’s scope if they facilitate international transfers as part of normal operations.Are there any exceptions?The 1% tax does not apply to transfers funded through:Qualifying bank accountsU.S.-issued debit cards (including prepaid cards)U.S.-issued credit cards Because of this, many consumers may start moving away from cash-funded transfers and toward electronic payment methods that fall outside the scope of the tax. The IRS will be watching for workaroundsIf the IRS believes a multi-step transaction was designed primarily to bypass the new rules, it may have the authority to recharacterize the transaction and apply the tax anyway. In the proposed regulations released on April 10, 2026, the IRS outlined an example of a transaction where a sender provided $500 to a remittance transfer provider in exchange for a prepaid card, and immediately initiated a remittance transfer in the amount of the $500 prepaid card that would be considered a remittance transfer. It is currently unclear what safeguards would be necessary around prepaid cards. Despite the potential for abuse, the IRS also noted that general-use prepaid cards come with numerous fees and charges, including activation fees, monthly fees, reloading fees, and many others the sum of which add up to significantly more than one percent of the usable card value in most cases.Could compliance be challenging?Yes, mostly because the new tax introduces a long list of operational requirements. To comply, businesses will need systems capable of identifying taxable transfers, tracking exempt transactions, calculating and collecting the tax, maintaining documentation and filing quarterly IRS reports. Some organizations may also need to begin filing federal excise tax returns for the first time.What you should do nowBusinesses and individuals who regularly send funds internationally should review how their transfers are currently structured. Cash-funded transfers and similar payment methods may now carry an additional cost beginning in 2026, while transfers funded through certain bank accounts or U.S.-issued debit and credit cards may avoid the excise tax entirely.
