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.