A federal tax of 1 percent has been collecting on certain money sent abroad since the first day of 2026, even though the Treasury Department’s rulebook for it is still a draft. The charge lands on senders who hand cash to a transfer company, and it is added at the counter rather than reported on a tax return. The draft regulations were published in April, and as of October 4 no final version has appeared.
Section 4475 puts a 1 percent charge on the sender
The tax comes from section 4475 of the Internal Revenue Code, which says a tax “equal to 1 percent of the amount of such transfer” is imposed on a remittance transfer and “shall be paid by the sender.” The company handling the transfer, called the remittance transfer provider, must collect the amount from the sender and remit it quarterly to the Treasury. If the provider fails to collect, the statute makes the provider liable for the tax that was not collected.
The effective date is written into the law: the amendments apply to transfers made after December 31, 2025. That puts the first covered transfers on January 1, 2026, and means the tax has been operating for the better part of nine months while the detailed regulations were still being written. The statute is in force on its own terms; the proposed regulations explain how to apply it, they do not switch it on.
Cash and similar physical instruments are taxed, bank-funded transfers are not
The tax is narrower than the headline phrase “money sent abroad” suggests. Under the statute it reaches transfers paid for with cash, a money order, a cashier’s check or a similar physical instrument. The IRS and Treasury’s proposed rule, published in the Federal Register on April 13, 2026, describes the covered transfers as electronic fund transfers to foreign recipients funded with cash, money orders, cashier’s checks or traveler’s checks.
Two funding methods are excluded in both texts. A transfer paid for from an account held at a financial institution regulated under the federal electronic-fund-transfer rules is outside the tax, and so is a transfer paid for with a debit card or credit card issued in the United States. In practice the dividing line is how the money gets to the provider. A sender who walks into an agent location with a roll of bills pays the 1 percent. A sender who funds the same transfer from a checking account, or taps a U.S.-issued card, does not.
The rate is a flat 1 percent of the transfer amount, with no bracket and no threshold in the statutory text. Because the sender is the one who owes it and the provider is the one who gathers it, the practical effect for a sender is a line on the receipt rather than a form to complete.
The April proposal is only a proposal
The Federal Register entry is labeled a proposed rule, filed under docket REG-114499-25 and RIN 1545-BR98. Comments were due June 12, 2026, and a public hearing was to be scheduled only if someone requested one. The proposal says its regulations would apply to remittance transfers made in calendar quarters beginning on or after the date the rules are published as final. A search of the Federal Register for the same subject on October 4 turned up the April proposal and no final rule.
That is the gap behind the headline. The tax is statutory and collecting now. The Treasury’s detailed regulations, including how providers must handle definitions and deposits, are not yet final, and the IRS has said so in its own guidance. The agency’s contact for questions on the regulations is Julia Barlow, reachable at (202) 317-6855, according to the proposal. Comments and hearing requests go to the IRS Publications and Regulations Section at (202) 317-6901 or [email protected].
Providers deposit on Form 720, with penalty relief while the rules are open
Providers report the tax on Form 720, the quarterly federal excise tax return, and the proposal says deposits follow the existing semimonthly excise-tax procedures. Because the regulations were not ready when the tax began, the IRS issued Notice 2025-55, which waives failure-to-deposit penalties for the first three calendar quarters of 2026. To qualify, the notice says, the provider must make timely deposits “even if the deposit amounts are computed incorrectly,” and must pay any quarterly underpayment in full by the Form 720 due date.
The same notice protects a provider’s use of the deposit safe harbor in later periods, as long as the provider meets the reasonable-cause standard for those three quarters. In other words, a provider that miscalculates the 1 percent in early 2026 is not penalized for the deposit error if it catches up when it files.
A later IRS release, Notice 2026-52, extends that relief. It applies to semimonthly periods ending before the applicability date of final regulations under section 4475, which ties the penalty relief to the final rule rather than to a fixed calendar quarter. Since the proposed rule’s own applicability date also hangs on the final rule’s publication, the two timelines move together.
What a final rule would settle
The notices show that the unfinished parts are about provider mechanics, not about whether the tax exists. The IRS describes Notice 2026-52 as relief that continues “while the rules governing the scope and application of the remittance transfer tax are being finalized.” Until the Treasury publishes final regulations, the statute’s 1 percent rate, the sender’s liability, the cash-funded scope and the two funding exclusions are what govern a transfer at the counter.
Keeping IRS paperwork in one place while a tax rule stays in draft
The remittance tax is a Form 720 matter for providers, so a sender has no return line to complete, but the proposed rule under docket REG-114499-25 is one more IRS item whose final shape is still pending. The unfinished practical job for any household is keeping IRS notices, refund status and dates organized so a letter is understood when it arrives.
The IRS Refund Recovery Kit is a 13-page kit with a notice decoder and a refund status tracker spreadsheet, plus the refund-trace steps for Form 3911 and the 3-year refund deadline.
Open the notice decoder and refund tracker in The IRS Refund Recovery Kit →
This piece was drafted with AI assistance; the rate, scope and dates were checked against section 4475, the April 13, 2026 Federal Register proposal and IRS Notices 2025-55 and 2026-52.
