Oct 16 ,2025

IRS Penalty Relief for Remittance Providers: Key Details

The U.S. Department of the Treasury and the Internal Revenue Service (IRS) have announced penalty relief for remittance transfer providers who fail to deposit the correct amount of excise tax under Section 4475 of the One Big Beautiful Bill Act (OBBBA). This relief is aimed at assisting providers during the initial implementation phases of the new tax requirements.

Recap: The One Big Beautiful Bill Act

Enacted on July 4, 2025, the One Big Beautiful Bill Act (OBBBA), officially known as Public Law 119-21, introduced significant changes to U.S. tax law. Among its provisions, Section 4475 established a 1% federal excise tax on certain remittance transfers made from the U.S., effective January 1, 2026. This tax applies to transfers where the sender provides cash, a money order, a cashier’s check, or a similar physical instrument. The remittance transfer provider is responsible for collecting and remitting this tax quarterly to the IRS.

New IRS Penalty Relief for Remittance Providers

In response to potential challenges in implementing the new tax requirements, the IRS has issued Notice 2025-55, providing limited penalty relief for remittance transfer providers during the first three quarters of 2026. Under this relief:
Timely Deposits: Providers can avoid deposit penalties if they make timely deposits, even if the amounts are incorrectly calculated.
Full Payment by Due Date: Any underpayment must be fully paid by the due date of the Form 720, Quarterly Federal Excise Tax Return, for the respective quarter.
Safe Harbor Rules: Providers may utilize the deposit safe harbor rules under the Excise Tax Procedural Regulations, provided they meet the reasonable cause standard for deposit penalties.
This relief is designed to assist providers as they adapt to the new tax requirements and ensure compliance without facing immediate penalties.

Key Takeaways for Remittance Transfer Providers

Effective Date: The remittance transfer tax applies to transfers occurring after December 31, 2025, with tax collection starting January 1, 2026.
Tax Rate: A 1% excise tax will be imposed on certain remittance transfers when the sender uses cash, a money order, a cashier’s check, or a similar physical instrument.
Deposit Requirements: Providers must make semi-monthly deposits and file quarterly returns with the IRS. The first semi-monthly deposit is due on January 29, 2026.
Penalty Relief: Notice 2025-55 offers penalty relief for the first three quarters of 2026, provided certain conditions are met.

Simplifying Filing with Simple720

Filing your remittance transfer tax can be simple and timely with the right tools. With Simple720, an IRS-Authorized online portal, you can easily complete your filings on time, avoiding penalties. Our user-friendly platform ensures seamless submission of Form 720, providing a reliable solution for remittance providers to stay compliant with the new excise tax requirements. Trust Simple720 to handle your filings accurately and efficiently.

Conclusion
The IRS's penalty relief initiative provides remittance transfer providers with a grace period to adjust to the new tax requirements under the One Big Beautiful Bill Act. By adhering to the guidelines set forth in Notice 2025-55, providers can ensure compliance and avoid unnecessary penalties during the initial implementation phase. Staying informed and proactive in understanding these changes will be crucial for seamless integration of the new tax obligations.

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