TITLE: IRS Extends Penalty Relief for the 1% Remittance Transfer Tax
The IRS Has Extended Penalty Relief for the New US Remittance Transfer Excise Tax
On 24 September 2026, the IRS issued Notice 2026-52. The notice extends relief previously provided by Notice 2025-55.
The relief now continues for eligible semimonthly deposit periods until final regulations under Internal Revenue Code section 4475 become applicable. It is no longer limited to the first three quarters of 2026.
For international sellers, ecommerce businesses and non-US owners of US LLCs, the key question is simple:
Did any business or personal transfer from the United States use cash or another physical payment instrument?
For most businesses using ordinary bank-to-bank wires, the 1% tax does not apply.
What Changed on 24 September 2026?
Notice 2026-52 extends temporary relief from the failure-to-deposit penalty under IRC section 6656.
A remittance transfer provider can be treated as meeting the reasonable cause standard if it:
- Makes timely semimonthly deposits, even if the amounts are calculated incorrectly.
- Pays any quarterly underpayment in full by the Form 720 filing deadline.
The notice also preserves access to the deposit safe harbour under Treasury Regulation section 40.6302(c)-1(b)(2), provided the reasonable cause conditions are satisfied.
This relief is important because the rules are new, the final regulations are still pending, and providers have had to build systems while the IRS continues to clarify the tax treatment.
The relief does not remove the tax itself. It also does not excuse a late Form 720 or an unpaid balance after the return deadline.
Understand the 1% Remittance Transfer Tax Before Reviewing Your Records
IRC section 4475 was added by section 70604 of the One, Big, Beautiful Bill Act, Public Law 119-21.
It imposes a 1% excise tax on certain remittance transfers made after 31 December 2025.
The tax generally applies when:
- A sender in the United States transfers money to a recipient outside the United States.
- The sender funds the transfer with cash.
- The sender uses a money order, cashier’s check, traveller’s check or similar physical instrument.
The tax generally does not apply when the transfer is funded:
- From an account at a regulated financial institution.
- With a US-issued debit card.
- With a US-issued credit card.
The sender is liable for the tax. However, the remittance transfer provider must collect and remit it. If the provider fails to collect the tax, the liability can become the provider’s responsibility.
The first semimonthly deposit was due on 29 January 2026. Providers report the liability on Form 720, Quarterly Federal Excise Tax Return, using IRS No. 155.
The IRS Form 720 instructions confirm that providers must make semimonthly deposits and file quarterly returns.
When Does the Tax Attach?
The tax attaches at the earlier of:
- The provider initiating the transfer.
- The sender paying for the transfer.
It can apply even if the money is never paid to the recipient.
If a transfer is cancelled or expires and the funds are returned, refund or credit rights may be available. Keep the cancellation evidence, original receipt, payment record and proof of returned funds. This documentation will support the accounting treatment and any claim.
What Notice 2026-52 Actually Changes
Notice 2025-55 covered the first three calendar quarters of 2026.
Notice 2026-52 modifies and amplifies that relief. It now applies to semimonthly periods ending before the applicability date of final section 4475 regulations.
This creates an open-ended transition period. The relief continues until final regulations become applicable, rather than ending automatically after September 2026.
However, you must still act carefully:
- Make each required deposit on time.
- Record how the deposit was calculated.
- Reconcile the actual quarterly liability.
- Pay any shortfall by the Form 720 due date.
- Monitor when final regulations become applicable.
The Treasury and IRS published proposed regulations under REG-114499-25 in April 2026. The comment period closed on 12 June 2026. The proposal includes anti-avoidance rules that may allow the IRS to disregard or recharacterise arrangements designed mainly to avoid the tax.
Examples include using prepaid or gift cards as pass-through instruments before sending money overseas.
Mark 2 November 2026 for the Third-Quarter Form 720
The third-quarter 2026 Form 720 covers transfers made during July, August and September.
The normal deadline is 31 October. Because that date falls on a Saturday, the return is due on Monday, 2 November 2026.
By that deadline, a qualifying provider must:
- File the third-quarter Form 720.
- Report the remittance transfer tax under IRS No. 155.
- Pay the full quarterly liability.
- Pay any underpayment arising from earlier semimonthly deposits.
Do not treat the extended penalty relief as permission to delay payment. It protects against a specific failure-to-deposit penalty where the stated conditions are met. It does not provide a general filing or payment extension.
The IRS recommends electronic filing for excise tax returns where available. The IRS excise tax guidance also explains that some Form 720 filers must make semimonthly deposits in addition to filing the quarterly return.
New Examiner Guidance Signals Closer Review
On 8 September 2026, IRS Small Business/Self-Employed issued interim guidance updating IRM 4.26.6.5.3.16.
The SB/SE memorandum allows examiners to refer potential foreign remittance tax issues to the excise tax function using Form 5346.
The guidance highlights:
- Foreign transfers funded by cash where no remittance tax was collected or paid.
- Prepaid or gift card purchases followed by an overseas transfer for the same or a similar amount.
- Unusual patterns of cancelled or expired foreign transfers.
- Transactions that may have been structured mainly to avoid the tax.
The memorandum also confirms an important boundary: inbound money transmissions received in the United States are not subject to the section 4475 tax.
This does not mean every international seller is automatically at risk. It means your records should clearly distinguish:
- Money received from customers or marketplaces.
- Ordinary bank payments to suppliers.
- Cash-funded outbound remittances.
- Transfers that were cancelled or refunded.
Money transfer counters are common in major US trade and immigrant communities, including parts of California, Texas, Florida, New York, New Jersey and Illinois. If your business, owner or staff uses a counter-based service, review those transactions now.
Three Examples for International Sellers
1. UK Owner of a Wyoming Single-Member LLC
A UK resident owns a Wyoming single-member LLC. The owner withdraws profits and sends the money
