Since Jan. 1, 2026, a 1% federal excise tax has applied to money sent abroad when the sender pays with cash, a money order, a cashier’s check or a similar physical instrument. President Trump’s 2025 tax law created it, and the sender owes it. A transfer funded from a bank account or with a U.S.-issued debit or credit card is treated differently, and that distinction decides who ends up paying.
A flat 1% of the amount sent, written into the tax code
The levy sits in section 4475 of the Internal Revenue Code, which imposes “a tax equal to 1 percent of the amount of such transfer” on any remittance transfer. The statute reaches transfers made after Dec. 31, 2025, so Jan. 1, 2026 is a start date that has already passed rather than one still ahead.
The arithmetic is short. A $200 transfer carries $2 of tax and a $500 transfer carries $5. A household that sends $400 home every month and pays for each one in cash owes $4 a month, or $48 across a year. The statute contains no exception based on the sender’s citizenship or nationality, so the rule follows the payment method rather than who is sending.
Where the tax stops: bank accounts and U.S. cards
The IRS describes the covered transfers in its April 2026 release on proposed regulations (IR-2026-48). The tax applies to remittances sent from the United States to recipients in foreign countries when the sender provides “cash, a money order, a cashier’s check, or other similar physical instrument.”
The statute draws the line on the other side. It does not tax a transfer when the funds are withdrawn from an account at a financial institution subject to federal banking regulation, or when the transfer is funded with a debit or credit card issued in the United States. Two people sending the same amount to the same relative can therefore end up with different results. One hands over a stack of bills at a counter and pays the 1%. The other sends the money from a checking account, or pays with a U.S. debit card, and does not.
That split is the whole household story. The tax follows how the money reaches the provider, not how much is sent or where it lands. Money orders and cashier’s checks sit on the taxed side because the IRS treats them, like cash, as physical instruments.
The sender is liable and the provider collects
The IRS release says “the sender is liable for the tax,” and that remittance transfer providers “are required to collect” it from certain senders. In practice a customer at a storefront counter sees the 1% added to a cash-funded transfer. The statute makes the sender the primary payer, and it makes the provider responsible if the tax is not paid at the time of the transfer.
Providers carry the reporting. They must make semimonthly deposits, the first due Jan. 29, 2026, and file a quarterly federal excise tax return on Form 720. In Notice 2025-55, the IRS said that if the tax is not collected from a sender, “the tax must be paid by the remittance transfer provider.” The same notice waives failure-to-deposit penalties for providers during the first three calendar quarters of 2026 if they make timely deposits, even when the amounts are computed incorrectly. That relief goes to providers. It does not reduce what a sender owes.
Proposed rules, closed comments and a law already in force
Treasury and the IRS released the proposed regulations on April 10, 2026, and comments were due June 12, 2026. Those rules fill in how the tax works day to day, but the tax itself does not wait on them. The statute is in force, and the release and notice describe providers already collecting and depositing it.
The pages read for this article do not say when final regulations will follow, and they name no IRS or Treasury official who carries the announcement. The release comes from the agencies as institutions.
What a remittance budget looks like after the change
For a household, the tax is small per transfer and steady over time. A worker who sends $300 in cash twice a month pays $6 a month, or $72 a year, on top of whatever the provider charges in fees, which the IRS pages do not address. A worker who funds the same transfers from a bank account pays no excise tax under the statute’s wording.
The IRS pages read describe no exemption for small transfers, and they do not tell senders how to recover the tax once it has been paid at a counter. What they do settle is the method-based line, which puts the cost on cash-type payments and leaves bank-account and U.S. card funding outside it.
Where the rule appears in the IRS’s own list
The IRS’s page on One, Big, Beautiful Bill provisions lists the remittance transfer tax as section 70604 of the law, a 1% excise tax starting Jan. 1, 2026. It instructs providers to collect the tax “when the sender pays with cash, a money order, a cashier’s check, or a similar physical instrument.” That wording, together with the statute’s bank-account and U.S. card exceptions, is the current scope of the rule.
A refund the IRS held, reduced or offset
Some households are dealing with an IRS notice about a refund that was held, reduced or offset, and the notice does not always say why. The kit below is written for a reader holding that kind of notice.
The IRS Refund Recovery Kit is a 13-page kit built around a notice decoder and a refund status tracker spreadsheet, so each notice can be matched to a cause and logged with its dates.
Decode an IRS refund notice, then log it in the tracker →
This article was drafted with AI assistance and checked against the IRS and statutory sources linked above.
