The Treasury Department and the IRS issued guidance on Oct. 7 that provides deposit penalty relief for the first three quarters of 2026 to remittance transfer providers.
Notice 2025-55 provides relief in connection with the new 1% excise tax imposed on certain remittance transfers under the One Big Beautiful Bill Act.
According to a tax alert from top five accounting firm RSM US, new Section 4475 of the Internal Revenue Code imposes a 1% excise tax on the amount of each remittance transfer from a sender in the U.S. to a person located in a foreign country, through a remittance transfer provider. The tax applies to remittance transfers made after Dec. 31, 2025.
“This represents a significant policy development aimed at improving tax compliance and oversight in the remittance sector while balancing concerns about consumer access and financial inclusion,” the RSM US tax alert states. “The tax has broad implications for individuals and businesses involved in international money transfers and applies to remittance transfers funded by cash, money orders, cashier’s checks, or other similar physical instruments.
“Although the tax is imposed on the sender, it must be collected and remitted quarterly by the remittance transfer provider,” RSM US adds. “If the tax is not paid by the sender at the time the transfer is made, then the tax is to be paid by the remittance transfer provider. This is known as secondary liability.”
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The Treasury Department and the IRS admitted that there might be challenges implementing the new law and decided to provide limited penalty relief related to remittance transfer tax deposits.
Notice 2025-55 provides limited penalty relief for remittance transfer providers who fail to deposit the correct amount of remittance transfer tax as required during the first three quarters of 2026. Specifically, these providers may avoid deposit penalties if they:
- Make timely deposits, even if they are incorrectly calculated, and
- Ultimately pay the full amount of any underpayment by the due date of Form 720, Quarterly Federal Excise Tax Return, for the quarter.
The guidance also states that remittance transfer providers can use the deposit safe harbor rules under the excise tax procedural regulations even if there was an underpayment of required deposits of the remittance transfer tax for the first three quarters of 2026. However, providers must satisfy the reasonable cause standard for deposit penalties, the IRS said.
Beginning Jan. 1, 2026, remittance transfer providers are required to collect the remittance transfer tax from certain senders, make semimonthly deposits, and file quarterly returns with the IRS. The first semimonthly deposit is due Jan. 29, 2026, the agency said.
Photo credit: gregobagel/iStock
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