The IRS has issued guidance providing deposit penalty relief to remittance transfer providers during the first three quarters of 2026, as companies prepare to implement a new 1% excise tax on certain remittance transfers. Notice 2025-55 acknowledges the challenges providers may face when adapting to the new requirements under the One, Big, Beautiful Bill.

Starting January 1, 2026, remittance transfer providers must collect a 1% tax on transfers made with cash, money orders, cashier’s checks, or similar physical payment methods. The first semimonthly deposit is due January 29, 2026, with quarterly returns filed using Form 720.

“Treasury and the IRS understand there might be challenges implementing the new law and have determined it is in the interest of sound tax administration to provide limited penalty relief,” according to the IRS announcement.

For businesses operating remittance-transfer services, the temporary penalty relief provides a transitional cushion as new compliance protocols are developed. The new tax represents a significant compliance shift that could impact cash flow and operational procedures.

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How the Penalty Relief Works

Under the temporary relief guidelines, remittance transfer providers can avoid deposit penalties during the first three quarters of 2026 if they meet specific conditions. Providers must make timely deposits even if the amounts are calculated incorrectly, and must pay any underpayment by the due date of their quarterly Form 720 return.

The guidance also allows providers to use existing deposit safe-harbor rules, even if there is an underpayment, provided they can demonstrate reasonable cause for the shortfall. This flexibility recognizes that companies need time to develop accurate systems for calculating and depositing the new tax.

Companies subject to these rules include traditional money transfer services, check-cashing businesses, and other financial service providers that facilitate remittance transfers using physical payment instruments. The tax does not apply to electronic transfers made through bank accounts or credit cards.

Compliance Obligations & Business Impact

The new remittance transfer tax creates additional compliance obligations for affected businesses. Providers become responsible for collecting the tax from senders and remitting it to the IRS through semimonthly deposits. If senders fail to pay, providers face secondary liability for the unpaid tax.

Business owners in this sector must now factor the administrative costs of tax collection, deposit calculations, and quarterly reporting into their operational planning. The penalty relief period provides time to establish these new systems without facing immediate financial penalties for deposit errors.

The IRS has indicated this is part of broader tax compliance changes under the One, Big, Beautiful Bill, suggesting additional guidance and requirements may emerge as the legislation is fully implemented.

Source: Treasury, IRS provide penalty relief for remittance transfer providers who fail to deposit excise tax under the One, Big, Beautiful Bill | IRS