A new excise tax has kicked in this year that will affect individuals and businesses sending money from the U.S. to another country by cash, money order, or cashier’s check. How can you mitigate or at least plan around it? Let’s take a look. 

This new excise tax went into effect on January 1, 2026, as part of the One Big Beautiful Bill (OBBB) Act. The 1% tax will be collected by the company handling the transaction and will most likely be applied to the sender’s payment method. As Western Union explains, “If you normally pay for transfers with cash, money orders, or cashier’s checks, you will see the new 1% tax added to your transactions starting in 2026.”

How the New Excise Tax Affects Senders

For anyone sending money overseas, it’s time to evaluate how you’re sending it and to discuss with your tax and financial advisors any potential issues they see. That’s because the new excise tax can kick in for small businesses in dozens of surprising ways. Perhaps you’re paying overseas contractors or freelancers, or purchasing foreign inventory or supplies, using traditional cash methods like wire transfers or money orders. Maybe you send cash abroad regularly to support your family or a family-run business. Often, business owners in cash-heavy sectors like restaurants, construction, or small retail send cash this way because it’s a more direct way to get it to where it’s needed. 

The good news is that there are several other ways to send money abroad that are exempt. Transfers paid with debit and credit cards, bank accounts (including ACH payments), or certain digital wallets such as Apple Pay appear to be exempt. However, as Carrie Brandon Elliot of Tax Notes points out, several details remain to be addressed, including the application of the tax to prepaid debit cards, digital transfers, and cryptocurrency payments. Plus, “Congress is still tinkering with the tax,” she adds. Therefore, it’s best to seek the guidance of a tax or financial professional who can interpret the law and monitor updates. 

How it Affects Those Responsible for Remittance Transfers

If your business plays a role in providing remittance transfers (meaning you are subject to the requirements of Form 720, Quarterly Federal Excise Tax Return and fall into this specific niche), it’s important to:

1. Identify which transactions are subject to the new tax by checking the payment method and whether the transfer qualifies as a taxable remittance.
2. Track and document any exemptions, such as transfers made with debit/credit cards, bank accounts, or digital wallets, and keep records explaining why each is exempt.
3. Update internal controls and procedures to ensure the tax is collected when required, and integrate tax reporting into transaction systems.
4. Maintain compliance files, including payment logs to foreign recipients and certifications for exempt transactions.
5. Conduct quarterly reviews of international payments and update staff training and internal documentation as regulations change.
6. Remit collected tax amounts to the IRS as required, usually quarterly, and ensure proper reporting accompanies these payments.
7. Monitor for new IRS guidance or legislative changes, especially regarding digital wallets, prepaid cards, and other payment methods.

The IRS has offered deposit penalty relief for the first three quarters of 2026 for remittance transfer providers who fail to deposit the correct amount of remittance transfer tax. This safe harbor is in effect if you make timely deposits (even if they are incorrectly calculated) and pay the full amount of underpayments by the due date of your Form 720. “However, providers must satisfy the reasonable cause standard for deposit penalties,” the IRS states.  

If you have questions about this new excise tax, either as a sender or provider, please feel free to contact us.

Shutterstock_2200141039. February 10, 2026