The 1% Remittance Transfer Tax: Cash and Money-Order Transfers Are Taxed, Electronic Transfers Are Not

Key takeaways

• The tax is 1% and turns entirely on how the transfer is funded. Under §4475(c), it applies only when the sender hands the provider cash, a money order, a cashier's check, or "any other similar physical instrument." Under the statutory exclusion in §4475(d), transfers funded by withdrawal from an account at a financial institution, or with a debit or credit card, are not taxed. The bare statute (§4475(d)(2)) excludes cards "issued in the United States," but the proposed regulations extend non-taxability to any debit or credit card regardless of the country in which it was issued.
• The provider, not just the sender, is on the hook. §4475(b)(1)–(2) make the sender the taxpayer and require the provider to collect and remit. Under §4475(b)(3), if the tax is not collected at the time of the transfer, the provider must pay it — converting a collection lapse into the provider's own liability.
• Compliance runs through Form 720 with semimonthly deposits. §4475 sits in chapter 36 of the Code, reported on Form 720, *Quarterly Federal Excise Tax Return*. Deposits are due for each semimonthly period; the first deposit, covering January 1–15, 2026, was due January 29, 2026.
• Notice 2025-55 relief is narrow and time-boxed. It waives the §6656 failure-to-deposit penalty for the first, second, and third calendar quarters of 2026 only, and only if deposits are made on time and any underpayment is paid in full by the Form 720 due date for that quarter. After Q3 2026, full deposit accuracy is expected.
• The rules are still proposed. The proposed regulations (REG-114499-25), published April 13, 2026 and announced April 10, 2026 in news release IR-2026-48, have a comment period closing June 12, 2026; the operative regime is not yet final.

What the statute actually taxes

§4475 was added to chapter 36 of the Code by section 70604 of Public Law 119-21, 139 Stat. 72 (July 4, 2025), the One Big Beautiful Bill Act. It imposes a 1% tax on the amount of certain remittance transfers occurring after December 31, 2025.

The defining feature of the tax is its funding test. §4475(c) limits the tax to remittance transfers "for which the sender provides cash, a money order, a cashier's check, or any other similar physical instrument" to the provider. §4475(d) then carves out, as nontaxable, transfers funded by withdrawal from an account held in or by a financial institution and transfers funded with a debit or credit card. The form of money matters more than the destination or the amount. A $5,000 wire pulled from a checking account is outside the tax; a $300 cash hand-off at a money-service counter, sent to the same recipient abroad, is inside it.

That line — physical instrument in, electronic funding out — is the single most important classification a provider has to operate. The statutory exclusion in §4475(d), as implemented by proposed §49.4475-1(d), confirms the boundary: transfers funded through withdrawals from accounts held at financial institutions (§4475(d)(1)), and transfers funded with a debit or credit card (§4475(d)(2)), are not subject to the tax. Notably, while §4475(d)(2) refers to cards "issued in the United States," the proposed regulations would treat any debit- or credit-card-funded transfer as nontaxable regardless of the country in which the card was issued. The practical consequence is that the same customer, sending the same dollars to the same person, can produce a taxable or non-taxable transfer depending solely on the funding instrument presented at the point of sale.

Who counts as a "provider"

§4475(e)(1) borrows its core definitions — "remittance transfer," "remittance transfer provider," and "sender" — from section 919(g) of the Electronic Fund Transfer Act, 15 U.S.C. 1693o-1(g). That is the same consumer-protection framework many institutions already map to under Regulation E. The population is therefore broad: banks, credit unions, money-service businesses, and other firms that move money cross-border for consumers in the ordinary course can fall within it. The threshold question for any client is not whether they "feel like" a remittance company, but whether they meet the EFTA definition of a remittance transfer provider — because that status carries the collection duty and the §4475(b)(3) backstop liability.

Where the liability lands

The statute splits the economics from the obligation. The sender owes the 1% under §4475(b)(1). But §4475(b)(2) puts collection and remittance on the provider, and §4475(b)(3) provides that if the tax is not collected at the time of the transfer, the provider must pay it. In effect, an uncollected dollar of tax does not disappear — it migrates to the provider's books. A provider that misclassifies a cash-funded transfer as exempt, or simply fails to charge the line item, has not avoided the tax; it has assumed it.

The funding instrument decides the tax, and a missed collection becomes the provider's own liability — not the customer's problem to reconcile later.

The deposit machinery and the January 29 trigger

Because §4475 is a chapter 36 excise tax, it runs on the standard excise deposit cadence. Under §40.6302(c)-1(a)(1), a Form 720 filer must deposit tax for each semimonthly period in which liability is incurred. A semimonthly period is the first 15 days of a month or the balance of the month after the 15th (§40.0-1(c)), and deposits are generally due by the 14th day of the following semimonthly period (§40.6302(c)-1(c)(1)) — practically, the 29th of the month for the first period and the 14th of the next month for the second. For the new tax, the first deposit, covering January 1–15, 2026, was due January 29, 2026.

The familiar deposit safe harbor in §40.6302(c)-1(b)(2) — depositing at least 1/6 of the prior look-back quarter's liability — cannot do its usual work in early 2026. The safe harbor requires a look-back quarter in which the same tax was imposed, and §4475 did not exist before 2026. As Notice 2025-55 explains, a provider cannot use the deposit safe harbor for this tax until the third calendar quarter of 2026, for which the first quarter of 2026 serves as the look-back quarter. Until then, deposits must be built from actual liability, period by period.

What Notice 2025-55 does — and does not — do

Treasury and the IRS recognized the standing-start problem and issued Notice 2025-55. It is a targeted reprieve, not a holiday from the tax itself.

The Notice provides relief from the §6656 failure-to-deposit penalty for remittance transfer tax deposits for the first three calendar quarters of 2026. For semimonthly periods in those quarters, a provider is deemed to satisfy the §6656 reasonable-cause standard if: (i) it makes timely deposits of the applicable tax, even if the deposit amounts are computed incorrectly; and (ii) the amount of any underpayment for each calendar quarter is paid in full by the due date for filing that quarter's Form 720. The Notice separately preserves a provider's ability to use the §40.6302(c)-1(b)(2) deposit safe harbor going forward, so long as the reasonable-cause standard is met for those quarters.

Read precisely, the relief covers under-deposits caused by good-faith miscalculation during the ramp; it does not excuse failing to deposit at all, and it does not reduce the underlying 1% liability, which must still be trued up by the quarterly Form 720 deadline. The relief ends after the third quarter of 2026. From the fourth quarter forward, providers are expected to deposit the correct amount on time, with no built-in cushion.

Proposed regulations: still a moving target

On April 13, 2026, Treasury and the IRS published proposed regulations under §4475 (REG-114499-25), announced three days earlier in news release IR-2026-48 (April 10, 2026), with a comment period closing June 12, 2026. As of this writing, the regulations are proposed, not final. Providers should treat the proposed rules as the best current guide to administration — funding-method classification, collection mechanics, and documentation — while recognizing that finalization could refine definitions, the treatment of mixed or partially cash-funded transfers, and edge cases at the physical-versus-electronic boundary. Comments submitted before the June 12 deadline are the last clean opportunity to influence those points.

Frequently asked questions

If a customer wires money abroad from their bank account, is the 1% tax due?

No. §4475(c) limits the tax to transfers the sender funds with cash, a money order, a cashier's check, or a similar physical instrument, and §4475(d) expressly excludes account- and card-funded transfers. A transfer funded by withdrawal from an account at a financial institution — including a wire or ACH pulled from that account — is not within the tax. The same is true for transfers funded with a debit or credit card; the proposed regulations would treat card-funded transfers as nontaxable regardless of where the card was issued.

Our company sends international payments in cash through a provider. Do we owe anything?

The sender bears the 1% tax under §4475(b)(1) when the funding instrument is cash or a similar physical instrument, and the provider will generally collect it at the point of transfer. A business that routinely makes covered cash-funded international payments should expect the charge and should quantify its exposure — and, where feasible, weigh shifting to account- or card-based funding, which is outside the tax under §4475(d).

We think we might be a remittance transfer provider. What is the first deadline we have already faced?

If you are a provider, the deposit cadence began immediately: the first semimonthly deposit, for January 1–15, 2026, was due January 29, 2026, with Form 720 filed quarterly. If early deposits were imperfect, Notice 2025-55 may protect you from the §6656 penalty for the first three quarters of 2026 — but only if deposits were timely and any shortfall is paid by each quarter's Form 720 due date.

Does Notice 2025-55 mean we can wait to get compliant?

No. The relief addresses the deposit penalty for miscalculations during the first three quarters of 2026; it does not suspend the tax, the collection duty, or the filing obligation, and it lapses after Q3 2026. Treat it as a transition runway, not a deferral.

Bottom line

Determine now whether the client is a remittance transfer provider under the EFTA definition pulled into §4475(e)(1); if so, the collection duty, Form 720 filings, and semimonthly deposits are already live, with deposits running since the January 29, 2026 first due date. Build a funding-method classification that cleanly separates taxable physical instruments (cash, money orders, cashier's checks) from transfers excluded under §4475(d) — account withdrawals and debit/credit-card funding — because a missed collection becomes the provider's own liability under §4475(b)(3). Use the Notice 2025-55 penalty relief for the first three quarters of 2026 — making timely deposits and truing up each quarter by the Form 720 deadline — but stand up full deposit accuracy before the relief expires after Q3 2026. Finally, track finalization of the proposed regulations (REG-114499-25, published April 13, 2026), whose comment period closes June 12, 2026, for any change to classification and collection mechanics — including the broadened, country-agnostic treatment of card-funded transfers.