1% Excise Tax on Remittance Transfers: Proposed Regs Target Cash

The Treasury Department and Internal Revenue Service (IRS) released proposed regulations for the new 1% excise tax on remittance transfers created by the One Big Beautiful Bill Act (OBBBA), effective Jan. 1, 2026.

The tax applies when a customer (sender) hands cash, a money order, or a cashier’s check to a remittance provider like Western Union or MoneyGram to send abroad. The tax generally does not apply to transfers funded from bank accounts or with U.S.-issued debit or credit cards. The sender legally owes the 1% tax, but the provider must collect it upfront and deposit it. If the provider fails to collect, the provider is liable. Providers report the tax on Form 720 (Quarterly Federal Excise Tax Return) and make semimonthly deposits. The first deposits under the new regime were due Jan. 29, 2026.

Proposed Regs for Excise Tax on Remittance Transfers

The proposed regulations clarify the application of the remittance transfer tax, including:
specifying the amount on which the remittance transfer tax is imposed
determining the full scope of physical instruments that trigger the tax, and
providing examples illustrating the application of these proposed definitions and rules.

Comments on the proposed regs are due by June 12, 2026.

In the meantime, payroll teams at employers facilitating cash remittances for foreign national workforces – or using remittance vendors as benefits – should monitor the rulemaking process and prepare to coordinate with AP on provider obligations.