1% Remittance Excise Tax from 2026: Cash Transfers Taxed—Bank-Account Funding Compliance Planning

Author: Gloria Liu, CPA ｜ YCL Tax, Accounting & Advisory

Bottom line in one breath

OBBBA added IRC §4475: a 1% excise tax on certain outbound remittance transfers made after December 31, 2025. The sender owes the tax; the remittance transfer provider (RTP) generally collects it and remits quarterly (often on Form 720). The funding method is the fork in the road: transfers funded with cash, a money order, a cashier’s check, or similar physical instruments are generally taxed; transfers funded by withdrawals from accounts at BSA-regulated financial institutions, or with a U.S.-issued debit or credit card, are generally exempt. As of September 2026, families remitting to China should verify how the counter or app is funded—compliance planning, not word games.

Background

Cross-border personal remittances were long governed mainly by disclosure, MSB licensing, and AML rules—not a federal remittance excise tax. OBBBA §70604 created §4475 effective for transfers after 2025. Treasury/IRS proposed regulations (REG-114499-25, April 2026) refine definitions, tax base, and anti-avoidance; Notice 2025-55 gave RTPs limited deposit-penalty relief for the first three quarters of 2026 (待核 for your quarter). Cash-at-the-counter paths are hit hardest; bank-app wires/ACH and qualifying U.S. card funding are usually cleaner—still confirm the product fits the statutory exemption.

Old vs. new

1. Existence of tax: None federally → 1% on covered outbound remittances.

2. Effective date: Transfers after Dec. 31, 2025.

3. Taxable funding: Cash, money orders, cashier’s checks, and similar physical instruments.

4. Common exemptions: BSA-regulated account withdrawals; U.S.-issued debit/credit cards.

5. Who pays: Sender legally; RTP collects in practice (or owes if it fails to collect).

6. Filing: RTP quarterly; individual senders usually see the charge at the counter—not a personal 720.

7. Proposed regs: May pull in traveler’s checks and police cash-then-remit patterns—final text 待核.

8. Crypto/wallets: Whether a rail is an “account withdrawal” or card funding is product-specific—待核; do not assume blanket exemption.

Self-check: does this affect you?

1. You routinely bring cash to a storefront remittance counter for family support abroad.

2. You buy a cashier’s check/money order first, then hand it to an MSB.

3. You already wire/ACH from a U.S. bank checking app—likely exempt; keep confirmations.

4. You fund a remittance app with a U.S.-issued debit/credit card—match the statement descriptor.

5. You operate an MSB/RTP and must collect 1%, file Form 720, and manage deposits.

Simplified examples (illustration only; ignores fees and FX spreads)

Example A — cash counter: $10,000 cash remittance in 2026. Illustration: about $100 of excise tax (1%), usually collected at send time.

Example B — bank account wire: Same $10,000 wired from an FDIC bank checking account. Illustration: if §4475(d) applies, no 1% tax (bank wire fees may still apply).

Example C — cashier’s check to MSB: Buy a cashier’s check at a bank, then give it to an MSB. Illustration: may still be treated as physical-instrument funding—not automatically the account exemption—confirm final regs and provider policy (待核).

Action timeline

1. Now: Prefer bank-account funding or qualifying U.S. cards; avoid unnecessary cash counters.

2. Document: Keep wire confirms, account debits, and card statements.

3. Large transfers: Separately consider FBAR/Form 8938 and destination-country rules—different regimes from §4475.

4. RTP shops: Update pricing displays, Form 720, and deposit calendars (post–Notice 2025-55 待核).

5. Product changes: Re-check exemption status when an app changes rails (待核).

What YCL can do

1. Map household remittance paths into taxable vs exempt funding types.

2. Help MSB/RTP clients frame §4475 collection and Form 720 processes (tax side).

3. Coordinate remittance planning with FBAR/8938 disclosure checklists.

4. Track proposed vs final regs and flag product impacts (待核).

5. Bilingual support from Cary (RTP) and Shanghai—CPA Chenchen Liu and Gloria—compliance planning.

FAQ

Q: If I wire from my U.S. bank app to family abroad, do I owe 1%?

A: Often no, if funds come directly from a qualifying BSA-regulated account under §4475(d)—confirm with the provider and final regs.

Q: Are crypto remittances automatically exempt?

A: The statute highlights account withdrawals and U.S. cards; crypto rails need a product-level analysis—待核.

Q: Who remits the tax—me or the company?

A: The sender owes it; the RTP collects. If the RTP fails to collect, it may be on the hook.

Book a consult

YCL Tax, Accounting & Advisory

Web: yclcpa.com ｜ Email: info@yclcpa.com

Phone: 919-802-8376 / 980-202-0666 ｜ WeChat: YCLUSA

U.S. office: 1140 Kildaire Farm Rd. STE 208, Cary, NC 27511

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Disclaimer

This article is general tax information only—not tax, legal, or investment advice. §4475 turns on remittance definitions, funding instruments, institution/card status, and final Treasury/IRS rules. Items marked 待核 need verification before sending funds or building RTP compliance. Consult a licensed professional.