The New 1% Remittance Transfer Tax: Who Actually Pays It
What the remittance transfer tax actually does
The One Big Beautiful Bill created a new 1% federal excise tax on certain remittance transfers, and it’s been live since January 1, 2026. On April 13, 2026 the Treasury and the IRS published proposed regulations (REG-114499-25, “Excise Tax on Remittance Transfers”) that spell out who collects it and which transfers count. The public comment window runs through June 12, 2026, so the version we have now is the proposal, not the last word.
Here’s the part that surprises people. The tax doesn’t hit every dollar that leaves the country. Under the proposed rules, the 1% applies when the sender funds the transfer with cash, a money order, a cashier’s check, or a similar physical instrument. Fund the same transfer from a bank account, a debit card, or a credit card and the proposed rules leave it out. The remittance transfer provider — the storefront or app moving the money — is the one who collects the 1% and sends it to the IRS.
Why this lands differently for New York clients
New York City sends more money abroad than almost anywhere in the country. A lot of that runs through cash-based storefronts in neighborhoods across Queens, the Bronx, and Brooklyn, and those are exactly the transfers the 1% was built to catch. So the people most exposed here aren’t the high earners we usually flag for new taxes. They’re the workers wiring a few hundred dollars home each month, often the ones least able to absorb another fee.
For our higher-income and business clients, the practical answer is usually “this isn’t your problem” — and that’s worth saying plainly. If you move money internationally through a bank wire, an ACH push, or a card, the proposed regulations don’t reach you. The exposure shows up in two places: family support sent as cash, and any closely held business that still settles overseas obligations through cash-funded transfers instead of bank channels. If that describes a piece of your operation, the fix is mostly mechanical — move the funding source to a bank account.
What it means by situation
Individuals supporting family abroad
If you send cash through a money-transfer service, expect the provider to add 1% at the counter. On a $500 transfer that’s $5. It’s small per transfer and meaningful over a year of monthly support. Switching to a bank-funded transfer, where your provider offers it, takes you out of the tax under the current proposal.
Business owners with cross-border payments
Most business payments to foreign vendors and contractors already move by bank wire, so they sit outside the tax. The risk is the odd cash-funded transfer. If you run any payments that way, this is a good moment to standardize on bank channels, which also cleans up your records for business management and year-end reconciliation.
High earners and investors moving money internationally
Bank wires, brokerage transfers, and card payments aren’t covered under the proposed rules. If your international activity is the kind we coordinate with cross-border planning and tax treaty analysis, the remittance tax is unlikely to touch it. The reporting that matters for you — foreign accounts, the foreign tax credit, residency — is unchanged by this rule.
What’s still open before the rules are final
Three things could shift. The comment period closes June 12, 2026, and the scope of “similar physical instrument” is the kind of phrase that gets tightened or loosened in a final rule. Provider compliance is already running since the tax took effect January 1, so collection is happening under interim guidance while the regulations are finalized. And the line between a covered cash transfer and an exempt bank-funded one will draw real attention from the money-transfer industry during the comment window.
We’ll track the final regulations and flag anything that changes the cash-versus-bank line. For now, the planning move is simple: know how your transfers are funded, because the funding method is what decides whether you pay.
How The Reed Corporation helps
If you’re not sure whether your international payments are exposed, we’ll walk through how each one is funded and where the 1% applies. For business owners, that often folds into a broader look at how money moves through the company. We work with clients on closely held business structure, cross-border reporting, and the international pieces that sit next to this — residency, treaties, and foreign-account filings. If you have family or operations abroad and want to know where you stand before the rules are final, that’s a quick conversation worth having.
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Frequently Asked Questions
Does the 1% remittance tax apply if I wire money from my bank account?
Under the proposed regulations, no. The 1% applies to transfers funded with cash, a money order, a cashier’s check, or a similar physical instrument. A transfer funded from a bank account, a debit card, or a credit card falls outside the tax as currently proposed. Because the rules aren’t final until after the June 12, 2026 comment period, keep an eye on the funding distinction — that’s the line that decides whether you pay.
When did the remittance transfer tax take effect?
January 1, 2026. The tax has been live since the start of the year under the One Big Beautiful Bill, and providers have been collecting it under interim guidance. The proposed regulations published April 13, 2026 add the detail on scope and collection, but the effective date is already behind us. If you’ve sent cash-funded transfers in 2026, the 1% may already have been added at the counter.
Who collects and pays the tax to the IRS?
The remittance transfer provider — the storefront, money-transfer company, or app that moves the funds. You don’t file anything for this tax yourself. The provider adds the 1% to a covered transfer and remits it. Your job as a sender is to understand when it applies, because the charge shows up on your transfer, not on your tax return.
Does this affect business payments to foreign vendors or contractors?
Usually not, because most business payments abroad already move by bank wire, which the proposed rules don’t cover. The exposure is any payment funded with cash or a physical instrument. If your business runs any cash-funded transfers, moving them to bank channels takes them out of the tax and tightens your records. We sort this out with clients as part of business management.
Is the 1% deductible or recoverable?
For a personal transfer to family, the 1% is a cost of sending the money, not a deductible expense. For a legitimate business payment, the fee generally follows the expense it’s attached to. The cleaner answer for most people is to avoid the tax entirely by funding transfers through a bank rather than cash. If you think a provider charged the 1% on a transfer the proposed rules exempt, keep the receipt and ask.