IRS Proposed Regulations Clarify Which International Money Transfers Are Subject to the 1% Remittance Tax

The Department of the Treasury and the IRS published proposed regulations on April 10, 2026, spelling out exactly which international money transfers trigger the 1% excise tax on remittance transfers under the One Big Beautiful Bill Act. The key finding: most electronic transfers by Americans abroad are exempt, because the tax applies only when the sender funds a transfer with cash, a money order, a cashier’s check, or a similar physical instrument. If you send money internationally through a U.S. bank wire, ACH transfer, or U.S.-issued debit or credit card, you are not subject to the 1% tax.

What Happened?

The One Big Beautiful Bill Act, signed into law on July 4, 2025, created a new 1% federal excise tax on certain remittance transfers sent from the United States to recipients abroad. The tax took effect on January 1, 2026, under new Internal Revenue Code Section 4475.

The proposed regulations, formally published in the Federal Register on April 13, 2026, answer several questions that have been open since the law took effect.

What triggers the tax: The 1% excise tax applies only when the sender funds an international transfer using cash, a money order, a cashier’s check, or a similar physical payment instrument. These are the types of transactions commonly processed at in-person locations operated by services like Western Union, MoneyGram, and other licensed money transmitters.
What is exempt: Transfers funded by a withdrawal from a U.S. bank account held at a Bank Secrecy Act-covered financial institution are explicitly exempt. Transfers funded by a U.S.-issued debit card or credit card are also exempt. In practical terms, most wire transfers and electronic bank transfers by Americans sending money internationally are not subject to tax.
How the tax is calculated: The tax base is the total amount provided by the sender, including any promotional bonuses but excluding service charges and applicable state taxes. On a $1,000 cash-funded remittance, the tax would be $10.
Who collects it: Remittance transfer providers, not individual senders, are responsible for collecting the 1% at the point of transaction. Providers must deposit the tax semi-monthly and file quarterly on Form 720, Quarterly Federal Excise Tax Return. The sender remains secondarily liable if the provider fails to collect.
Penalty relief for providers: The IRS separately issued Notice 2025-55, providing limited penalty relief for remittance transfer providers who fail to deposit the correct amount during the first three quarters of 2026.

The public comment period on the proposed regulations closes June 12, 2026.

Who Does This Affect?

Anyone who sends money abroad using cash-funded services such as Western Union, MoneyGram, or similar in-person transfer providers: your transfers are now subject to the 1% excise tax, collected by the provider at the point of transaction
Immigrants and visa holders supporting family members in other countries through cash or money order transactions: these are among the most commonly affected transfers, and you should confirm with your provider whether the 1% is being collected
Expats who send money home or to family using bank wires, ACH, or U.S.-issued cards: your transfers are exempt under the proposed regulations, but you should verify your provider’s funding method classification
Americans who use international transfer apps (such as Wise, Remitly, or Xoom) funded through a linked U.S. bank account or card: these transfers should be exempt, though providers may update their terms as the regulations are finalized
Self-employed expats and digital nomads who move money between their own U.S. and foreign accounts: bank-to-bank transfers are not covered, but any transaction routed through a cash-funded remittance provider would be
Retirees abroad who receive pension or Social Security deposits in U.S. accounts and wire funds to a foreign account for living expenses: standard bank wire transfers remain exempt

What Does This Mean for U.S. Taxpayers Abroad?

Most expats are not affected. If you fund international transfers electronically through your U.S. bank account, a debit card, or a credit card, the 1% tax does not apply to you. The regulations draw a clear line between cash-funded and electronically funded transfers.
The tax targets a specific transaction type, not a specific group of people. The 1% excise tax is not an expat-specific provision. It applies based on how the transfer is funded, not on the sender’s citizenship or residency status. A U.S. resident sending money to a relative abroad using cash at a Western Union counter and a U.S. expat doing the same thing are treated identically.
Switching your payment method is the simplest way to avoid the tax. If you currently send money abroad in cash or by money order at a physical location, funding the same transfer with a linked U.S. bank account or a U.S.-issued card eliminates the 1% charge entirely.
The regulations are proposed, not final. The public comment period runs through June 12, 2026. Treasury and the IRS may adjust definitions or exemptions based on comments received. The underlying 1% tax itself, however, has been in effect since January 1, 2026, regardless of the regulatory timeline.

What Should You Do Next?

If you send money internationally via bank wire, ACH, or a U.S.-issued card, no action is required. Your transfers are exempt under the proposed regulations. Keep records of how each transfer was funded in case questions arise.
If you send money using cash, money orders, or cashier’s checks at a transfer service, confirm with your provider that the 1% is being collected and reflected on your receipt. Consider switching to an electronic funding method to avoid the tax going forward.
If you are unsure how your transfers are classified, contact your remittance provider and ask whether your transaction method falls under the cash-funded or electronically funded category. The distinction determines whether the 1% applies.
If you want to comment on the proposed regulations, Public comments are open through June 12, 2026, and can be submitted through Regulations.gov.

For transfers involving large sums, multiple countries, or business-related payments, a tax professional who works with international transfers can help you confirm which transactions are covered and how to structure your payments to stay compliant.

Greenback helps U.S. expats and international taxpayers sort through exactly these kinds of cross-border questions.

Cross-Border Finances Can Get Complicated

Greenback helps you handle everything from FBAR to the new remittance tax so nothing slips through the cracks.

The information in this article is for general informational purposes only and does not constitute tax, legal, or financial advice. Tax rules are complex and change frequently. Consult a qualified tax professional regarding your specific situation before taking any action.