Starting January 1, 2026, the United States has implemented a new 1% tax on certain types of international remittance transactions. This regulation specifically targets remittances paid in cash, via money orders, cashier’s checks, or similar physical instruments. It mandates that transfer service providers collect this tax while adhering to a schedule of deposits and reports to the IRS.
The 1% taxation is applicable when the sender pays for the remittance using:
- Cash
- Money Order
- Cashier's Check
- Similar Physical Instrument
This change notably impacts individuals who send remittances through these payment methods, as well as the businesses that process these transactions. These service providers are responsible for collecting the tax and forwarding it to the federal government.
Requirements for Service Providers
Upon the implementation of this tax, providers are required to:
- Collect the 1% special tax on applicable transactions, depending on the payment method.
- Make bi-weekly deposits.
- Submit quarterly reports to the IRS.
The first bi-weekly deposit is due on January 29, 2026. Additionally, the Department of the Treasury and the IRS are offering limited penalty relief for the first three quarters of 2026. According to the guidelines, providers can avoid penalties on deposits if they are made on time, even if adjustments follow, as long as any deficiencies are paid before the quarterly deadline (Form 720).
Potential Global Impact
This tax could significantly affect countries such as Mexico, India, China, and the Philippines, which are major recipients of U.S. remittances. According to El País, there has been a notable increase in remittances in Latin American nations like Honduras, Guatemala, and Colombia.
In Mexico, remittances reached a record $64.7 billion in 2024. However, from January to October 2025, there was a decline, with only $51.3 billion recorded—a 5% decrease compared to the same period in 2024.
Understanding the New Remittance Tax and Its Implications
What types of transactions are affected by the new remittance tax in the U.S.?
The tax affects remittances paid using cash, money orders, cashier’s checks, or similar physical instruments.
Who is responsible for collecting and reporting the new tax?
Providers of transfer services must collect the tax and report it through bi-weekly deposits and quarterly reports to the IRS.
How might the new tax impact major remittance-receiving countries?
Countries like Mexico, India, China, and the Philippines, which are significant beneficiaries of U.S. remittances, could face economic challenges due to this tax.