US 1% remittance tax: what it means for transfers abroad

Country reference

• Country: United States (planned expansion country)
• Authorities: Internal Revenue Service (IRS); US Department of the Treasury
• Topic: Excise tax on remittance transfers
• Key date: Effective 1 January 2026; proposed regulations 10 April 2026
• Law: Internal Revenue Code, as amended by Public Law 119-21 (section 70604)

How the tax works

• Rate: 1% of the amount transferred.
• Scope: transfers from the US to recipients abroad paid with cash, a money order, a cashier’s check or a similar physical instrument.
• Who pays: the sender.
• Who collects: the remittance transfer provider, which becomes liable if it fails to collect.

Provider obligations

• Semimonthly deposits; the first was due on 29 January 2026.
• Quarterly reporting on Form 720.
• Limited penalty relief for deposit failures in the first three quarters of 2026 under Notice 2025-55.
• Proposed regulations issued on 10 April 2026, with comments due by 12 June 2026.

What it means

• Transfers funded from a bank account or card are generally outside the tax, based on the cash-funded scope described by the IRS; check the final rules for detail.
• Workers sending wages home in cash pay an extra 1%.
• Exchange houses and money transfer operators with US operations must collect, deposit and report.

What to do now

• Providers: confirm systems flag cash-funded transfers and calculate the tax.
• Employers of overseas staff in the US: encourage payroll to bank accounts to keep transfers outside the cash rule.
• Watch for final regulations.

Our take

The tax is small but visible, and it pushes remittances into the banking system. For Gulf exchange houses with US arms, the compliance burden is the real cost.