The IRS has rolled out new guidance under Notice 2025-55 that provides limited relief from deposit penalties for remittance transfer providers, specifically for the first three quarters of 2026. This move is designed to ease the burden on providers as they adjust to the new remittance transfer excise tax regime introduced by the “One Big Beautiful” tax legislation.
In this edition, we’ll explore the key provisions of the relief, important compliance deadlines, and implications for remittance services.
Key Provisions of the Relief
1. Penalty Relief for Under-Deposits
Under the guidance, remittance transfer providers may avoid deposit penalties if they:
- Make timely deposits, even if those deposits are incorrectly calculated
- Ultimately pay the full amount of any underpayment by the due date of Form 720 (Quarterly Federal Excise Tax Return) for that quarter.
This gives providers some buffer while they get accustomed to the new tax rules.
2. Safe Harbor & Reasonable Cause Standard
The IRS allows providers to rely on deposit safe harbor rules under the Excise Tax Procedural Regulations, even if under-deposits occur, for the first three quarters of 2026 — so long as they satisfy the reasonable cause standard for deposit penalties.
This means providers will need to document their rationale (e.g. compliance complexity, system issues) if they are later challenged on why a deposit was underpaid.
What Remittance Providers Need to Do (Action Items & Deadlines)
Collection & Deposit Regime Begins Jan 1, 2026
Starting January 1, 2026:
- Providers must collect the remittance transfer tax from eligible senders
- Make semi-monthly deposits of those amounts
- File quarterly returns with the IRS via Form 720
The first semi-monthly deposit for 2026 is due January 29, 2026.
Scope & Rate
- The remittance transfer tax rate is 1%
- It applies to certain remittances when the sender uses cash, money orders, cashier’s checks, or similar physical instruments
What Happens After Q3 2026
The penalty relief applies only through the first three quarters of 2026. After that, providers are expected to be fully compliant with deposit and penalty rules. The IRS’s leniency is transitional, not permanent.
Implications & Considerations
- This relief underscores the IRS’s recognition of implementation challenges for remittance providers under the new law.
- While the relief is helpful, providers must still pay the full tax liability by the Form 720 due date, so underestimating payments is risky.
- Entities should maintain strong documentation of efforts, system adjustments, and challenges encountered to support any reasonable cause defenses later.
- Because the relief is limited to deposit penalty relief (and only for part of 2026), providers should urgently prepare compliance infrastructure now.
Conclusion
The IRS’s Notice 2025-55 offers much-needed breathing room for remittance transfer providers as they adapt to the new excise tax. By allowing deposit penalty relief for the first three quarters of 2026—so long as providers act timely and reasonably—the agency is balancing enforcement with practical flexibility.
However, this relief is temporary. Providers must use this period to build robust compliance systems, fully understand the rules, and be ready for stricter scrutiny afterward. As the new remittance tax regime takes effect in January 2026, diligence in deposits, documentation, and reporting will be crucial to avoid future exposure.
