IRS Eases Penalties for Cross-Border Remittance Transfers

The IRS has just offered a sigh of relief for taxpayers and remittance service providers caught in the crosshairs of the new 1% excise tax on cross-border money transfers, under the One Big Beautiful Bill Act (OBBBA). 

Starting January 1, 2026, money transfer companies will need to collect and remit this tax on physical cash-based remittances, like money orders or cashier’s checks, using Form 720, filed quarterly. 

But here’s the update that matters:  The IRS, realizing the compliance chaos this could cause, has granted a grace period for the first three quarters of 2026, allowing remittance providers to adjust and correct deposit errors without facing penalties. 

This move follows an internal slowdown at the agency, with more than 34,000 IRS employees furloughed amid ongoing shutdowns. The relief is both a compliance breather and an acknowledgment that even the IRS needs time to reboot. 

Meanwhile, global families and small businesses that depend on remittances are watching closely. For millions of Americans sending money abroad to Mexico, India, or the Philippines, this “temporary excise tax” could quickly feel permanent. 

Key Takeaway:  While the 1% remittance tax begins in 2026, penalties won’t apply until after September 30, 2026. The IRS may be juggling shutdowns, inflation adjustments, and new rules, but this grace period gives everyone a chance to catch up before the full impact hits. 

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