New 1% Tax on Cash Transfers Abroad: What It Means for Individuals and Small Businesses

Starting in 2026, a new 1% excise tax will apply to certain types of money transfers sent outside the U.S. This new rule, tucked into Section 70604 of the One Big Beautiful Bill, targets cash-based remittance transfers—but it doesn’t apply to everyone.

Here’s what you need to know:

What Is a Remittance Transfer?

The IRS is borrowing definitions from the Electronic Fund Transfer Act (15 U.S.C. §1693o-1(g)), which defines a remittance transfer as a money transfer sent by a consumer in the U.S. to someone outside the U.S. using a remittance transfer provider.

These are commonly used by:

  • Individuals supporting family members abroad

  • Small business owners paying overseas vendors or contractors

  • Immigrants sending money home via services like Western Union or MoneyGram

Who Pays the Tax?

The sender pays the 1% tax at the time of the transfer, but the remittance provider (like a check-cashing store or money transmitter) is required to collect and remit the tax to the IRS.

What Transfers Are Taxed?

This new excise tax applies only if the transfer is funded with:

  • Cash

  • Money orders

  • Cashier’s checks

  • Or any similar physical instrument

These “off-the-grid” payments are often difficult for the IRS to trace, which is why they are being singled out.

What Transfers Are Exempt?

There is no 1% tax if the remittance is:

  • Funded from a U.S. bank account

  • Paid with a U.S.-issued debit or credit card

  • Sent via digital apps like Zelle, PayPal, or Venmo, provided the source of funds is linked to a qualifying account

So if you use a regulated U.S. financial institution or app connected to your bank, you’re in the clear.

When Does It Start?

  • The tax applies to transfers made after December 31, 2025

  • The remittance provider must remit the collected tax quarterly

  • If they don’t collect it, they are secondarily liable for payment

Legal Reference: 26 U.S. Code § 4475 (as enacted by §70604 of the One Big Beautiful Bill)

Takeaways for Your Business or Household

  • If you send money abroad with cash, you’ll pay more starting in 2026

  • Using your bank account or debit card will help avoid the tax

  • Small businesses with international suppliers should reassess payment methods

Need help updating your payment workflows? Hedgi AI can track these transactions automatically and keep your books compliant with the new law — no manual tagging needed.