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There is a new tax regime beginning January 1, 2026, that will apply to providers of remittance transfers, that is, companies that engage in sending money across borders through cash, money orders, or other similar instruments. These providers will be subjected to a one percent excise tax to be collected and remitted under the One Big, Beautiful Bill (OBBB).
As an incentive to ease the transition and identify the implementation challenges, the Department of the Treasury and the IRS have recently proposed penalty relief in the first three quarters of 2026 to those who do not deposit the entire amount of tax by the right time, provided certain conditions are met.
As your enterprise is related to remittance transfer, this update is valuable, and the action will assist you in avoiding hefty fines. In this article, we will talk about: what is covered in the relief, how you qualify, and how TaxProNext will be able to assist you in being in compliance but not at risk.
What the Relief Covers (And How It Works)
Under Notice 2025-55, remittance transfer providers are permitted to evade the deposit penalties during the first three quarters of 2026, regardless of whether the calculations of their deposits are imperfect, provided that they meet certain requirements.
Here’s what the relief allows:
- You will have to make deposits on time, but the value will be slightly less than that which is ultimately due.
- You have to remit any such underpayment (i.e., the deficit) by the due date of the quarterly return on Form 720.
- You are permitted to apply the deposit safe harbor regulations of the Excise Tax Procedural Regulations, despite any underpayment during those quarters.
- Nevertheless, the providers still need to meet a reasonable cause standard not to receive any punishment. IRS
Relief is extremely restricted: it is restricted to the first three quarters of 2026. Then, there must be complete compliance, and not the same leniency.
In addition to that, the excise tax requirements by OBB add new requirements: semimonthly deposits, quarterly requirements, and the 1 percent tax on qualifying remittance transfers.
Why This Relief Is Critical for Remittance Providers
In case you are in the remittance or money services business (MSP) arena, the change will have an impact on your bottom line and operations. The reasons why the relief is important:
1. Grace period to transition systems: The new excise tax workflows might not be supported by many platforms and back-end systems. The relief offers breathing room.
2. Avoiding penalty risk during ramp-up: Any little mistake may activate penalties - this relief will prevent the possibility of this risk in the course of system adjustments.
3. Compliance alignment: The guidance mitigates shock among the providers as they become familiar with OBBB and have time to harmonize internal operations.
4. Cash-flow management: It allows you to pay in smaller amounts instead of the perfect deposits in the beginning.
The relief is, however, not automatic, and you should comply with the rules and keep proper documentation. An error can result in punishments in the future.
What You Should Do Right Now
If you’re a remittance transfer provider (or plan to be), here’s your action checklist:
1. Review your remittance transfer operations: Determine what transactions are to be subject to the excise tax regulations (cash, money orders, cashier's checks, etc.).
2. Prepare your deposit mechanics early: Make sure that your system has the capability of making semimonthly deposits, even in cases where you are estimating the tax liability.
3. Plan to pay underpayments on time: The deficits should be paid in accordance with the due date of the quarterly Form 720.
4. Document “reasonable cause” factors: If you expect ambiguity or transition struggles, keep logs, memos, or communications that justify your estimates.
5. Adopt safe harbor methods: Take advantage of the excise tax deposit safe harbor rules when you are in a position to, but not otherwise.
6. Consult a trusted advisor: Arrange your systems, detect traps, and record compliance posture by talking to tax professionals (such as TaxProNext) now.
How TaxProNext Supports Remittance Providers Through This Transition
At TaxProNext, we realize that excise tax compliance is a new ground for many businesses. We provide practical assistance to ensure that you take advantage of this relief and can be placed at an advantage when full-fledged rules come into play.
What We Do:
- System audits & gap analysis: We evaluate your existing remittance infrastructure, identify gaps, and recommend on tax collection and deposit structure.
- Deposit & withholding setup: We make deposit plans, tax allocation plans, and safe haven use in order to reduce your risk.
- Penalty relief support: In case your business qualifies, we assist in putting your justification file (reasonable cause) and compliance documentation together.
- Form 720 and excise filings: We prepare, review, and file the needed quarterly returns.
- Ongoing compliance monitoring: Your logic, documentation, and workflows are updated as rules change after the year 2026, so that you are not punished in the future.
When you work with TaxProNext, you are getting a compliance shield; thus, you do not need to guess.
Final Thoughts & Call to Action
This IRS directive provides a unique grace period of encouragement to remittance enterprises that change to the new tax system of excise. Yet it will not last long - the preparation and compliance should begin now.
In case you do remittance transfers, do not wait until 2026 arrives; do it now:
- Make certain that your systems are able to collect, store, and apply the new tax accordingly.
- Develop your documentation and compliance package according to the relief rules.
- Collaborate with professionals with knowledge of the law on excise and remittance.
TaxProNext is prepared to help your organization with this transition, system configuration, up to penalty relief documentation, and compliance. We will make you confident to start your new year 2026 with no security problems.
Call TaxProNextnow to book your Penalty Relief Readiness Audit so that your remittance operations are covered and in compliance with this new law as it becomes effective.
We should ensure that you enjoy relief and do not receive surprise penalties.
FAQs
Q: What is the remittance transfer excise tax under OBBB?
Starting January 1, 2026, a 1 percent excise tax will be levied on some of the remittance transfers conducted through physical instruments such as cash, money order, or cashier's checks.
Q: Which years are eligible for penalty relief?
Under the deposit penalty relief in Notice 2025-55, only the first three quarters of 2026 would be subject to the relief.
Q: What does “reasonable cause” mean?
It is the fact that you have an identified cause (transition problems, delay on the part of the system, unclear instructions) that led to an underpayment, assuming that the deposit occurred in time and was paid in full.
Q: Can a provider use the deposit safe harbor even with underpayments?
Yes - at the relief period, even where the provider underpaid, the safe harbor rules of the Excise Tax Procedural Regulations can be used, provided it satisfies the conditions.
Q: Does the relief apply after quarter 3 of 2026?
No, then, normal rules and punishments.
