Since 1 January 2026 the United States has taxed a particular way of sending money abroad. The rate is small, 1 percent, and the tax does not care who you are, which passport you hold or whether you live in the country or are only visiting. It cares about one thing only: how you pay for the transfer. Hand a money transfer company cash, a money order or a cashier's check and the tax applies. Pay from a bank account or with a card and it does not.
That distinction turns an old question into a sharper one. Anyone who lives, works or spends long stretches in the United States without the ordinary American banking footprint (seasonal workers, foreign students, newly arrived spouses, retirees who split the year, entrepreneurs who have not yet set up their US banking) now has a small but permanent reason to get a proper account. The rules also contain a detail that is easy to miss: under the government's own proposed regulations, a card issued outside the United States keeps the transfer out of the tax as well.
Where the tax comes from
The tax sits in section 4475 of the Internal Revenue Code, added by section 70604 of Public Law 119-21 of 4 July 2025, the budget law the administration calls the One, Big, Beautiful Bill Act. The Brief has looked at what the wider bill cuts; the remittance provision was one of its smaller lines and one of the few that reaches people with no US tax return at all.
The mechanics are set out in the background section of the proposed regulations the Treasury Department and the IRS published on 13 April 2026 (91 FR 18797, docket REG-114499-25):
- The tax is 1 percent of the amount of certain remittance transfers made after 31 December 2025.
- It is paid by the sender. The remittance transfer provider collects it and pays it over to the IRS.
- If the provider fails to collect it at the time of the transfer, the provider owes it.
- It applies only where the sender gives the provider cash, a money order, a cashier's check or another "similar physical instrument".
- It does not apply where the money is withdrawn from an account at a US financial institution covered by the Bank Secrecy Act, or where the transfer is funded with a debit or credit card issued in the United States.
The IRS confirmed the start date in its news release IR-2025-102 of 7 October 2025: from 1 January 2026 providers must collect the tax from certain senders, make semimonthly deposits and file quarterly excise tax returns on Form 720, with the first deposit due on 29 January 2026. In Notice 2025-55 the IRS gave providers relief from deposit penalties for the first three calendar quarters of 2026, provided they deposit on time and pay any shortfall by the Form 720 due date. That relief is for the collectors. It changes nothing for the person at the counter, who has owed the 1 percent since New Year's Day.
Who counts as a sender
This is the part most non-Americans will want to read twice. The law borrows its definitions from the Electronic Fund Transfer Act and the Consumer Financial Protection Bureau's Regulation E. Under the proposed rules, a sender is a consumer in a State (a natural person, in any US state, territory or the District of Columbia) who asks a provider to send money to a recipient abroad primarily for personal, family or household purposes.
Nothing in that definition turns on citizenship, immigration status or tax residence. A Dutch retiree spending the winter in Arizona, a Filipino nurse on a work visa in Texas and a US citizen supporting a parent in Mexico are all senders if they stand in a US location and pay a transfer company to move money abroad. Business payments fall outside, because the sender has to be a natural person acting for personal purposes. The proposed rules ask providers to classify purpose the same way they already do for their consumer protection compliance.
The designated recipient is anyone the sender names to receive the money at a location physically outside the United States. Domestic transfers are not covered.
What makes a transfer taxable
The trigger is the funding instrument, and the proposed regulations draw the lines carefully.
Taxable: cash (US dollars or any foreign currency in physical form), money orders, cashier's checks and, added by the Treasury under its statutory authority, traveler's checks, which the preamble calls "virtually indistinguishable" from money orders and cashier's checks.
Not taxable: transfers funded from a bank account, transfers paid by debit or credit card, personal or business checks made out to the provider, and general-use prepaid cards. The proposed rules reach this result by a route worth understanding. The statute exempts cards "issued in the United States". But the Treasury reads the list of taxable instruments as closed: a card is simply not one of them. In the words of the economic analysis in the notice, a sender's use of "credit and debit cards (regardless of country of issuance)" would not trigger the tax. A visitor who pays a transfer app with a card from a bank in Germany, Brazil or the Philippines is therefore outside the tax under the proposed rules, not because of the exemption but because the tax never attached in the first place.
Three further rules close the obvious gaps:
- Check cashing counts as cash. If a provider or its agent cashes a paycheck made out to the sender and the money funds a transfer, the transfer is treated as cash-funded, whether or not the sender ever touches the notes.
- Buying a money order from your bank does not help. When a money order or cashier's check is settled, that is not a "withdrawal" from the sender's account, the preamble says, so the bank account exemption does not rescue it. The source of the money used to buy the instrument is irrelevant.
- Anti-avoidance. Transactions entered into with a principal purpose of avoiding the tax may be disregarded or recharacterised. The two examples in the proposed rules involve a provider or its agent handing out prepaid cards to customers who pay in cash, precisely so that the transfer looks card-funded. That will not work.
How much, and on what
The tax base is the amount that will actually reach the recipient. Service fees, state taxes and charges for other goods and services are not included; a promotional bonus that the provider adds to the amount delivered is. Send USD 500 in cash with a USD 8 fee and the tax is USD 5, not USD 5.08.
Two thresholds from Regulation E matter. Under 12 CFR 1005.30, transfers of USD 15 or less are not "remittance transfers" at all, and the proposed tax rules keep that exclusion. Regulation E also has a safe harbor for firms that send 500 or fewer transfers a year; the Treasury refuses to carry it over, because otherwise two identical cash transfers could be taxed differently depending on the size of the shop.
The tax attaches when the transfer is made, meaning the earlier of the moment the provider initiates it or the moment the sender pays. If a transfer is cancelled or expires and the money comes back, the sender, not the provider, can claim a refund of the tax from the IRS.
Where the rules stand now
The notice is a proposal. Comments and hearing requests had to reach the IRS by 12 June 2026, and as of 26 September 2026 no final regulations had been published in the Federal Register. The proposed rules would formally apply from the first calendar quarter after final rules appear, but the notice lets providers and taxpayers rely on them for transfers made after 31 December 2025, as long as they follow them in full and consistently. For practical purposes, the proposed text is how the tax works in 2026.
The statute itself needs no regulation to bite. The 1 percent has been due on cash-funded transfers since January, and any provider that failed to collect it is liable for it.
What it means for people without a US bank account
A 1 percent charge is modest on any single transfer. It is not modest as a structure. Someone who sends USD 1,500 a month home in cash pays USD 180 a year in this tax alone, on top of the provider's fees and exchange margin, every year, with no deduction and no way to claim it back. The same person paying from a bank account or by card pays nothing. The tax is a price on not having a bank relationship.
That makes the account question more concrete for the groups most likely to use cash:
Foreigners working in the United States. A non-US person can open a US bank account. The federal customer identification rule for banks, 31 CFR 1020.220, requires a taxpayer identification number from US persons, but for a non-US person it accepts one or more of: a taxpayer identification number, a passport number and country of issuance, an alien identification card number, or the number of another government-issued photo document evidencing nationality or residence. Whether a given bank will actually open the account is a separate, commercial decision, and the practical hurdles (a US address, in-person identification, the bank's own risk appetite) are the ones the Brief covered in opening a US bank account as a non-resident without an SSN.
Visitors and part-year residents. Anyone who already holds a card from a bank at home can fund a transfer with it and, under the proposed rules, stay outside the tax. The cost to compare is then the card issuer's foreign transaction or cash-advance treatment against the 1 percent. Some issuers treat money transfer payments as cash advances with their own fees, so the card route is not automatically cheaper. It is, however, untaxed.
People who pay with money orders out of habit. The money order is taxed even if it was bought with money from a US bank account. Switching the funding method, not the provider, is what matters.
Longer-term residents and entrepreneurs. For anyone planning a lasting presence, a US account and eventually a US-issued card do more than avoid a 1 percent levy. They build the credit history that decides access to US credit products, which the Brief discussed in the context of US credit cards for non-residents.
The bigger pattern
The remittance tax is a small line in a very large law, but it fits a pattern visible across banking in 2026. Governments increasingly treat cash and unbanked transfers as the exception to be priced, and account-based payments as the norm. The funding test in section 4475 is a clean example: the tax falls where the state has the least visibility (a cash counter) and disappears where a regulated bank already knows the customer.
For people whose lives cross borders, the lesson is the same one the Brief drew from the de-banking wave in When Your Bank Fires You. Banking access is infrastructure. Having it in the right country, before you need it, is cheaper than improvising at the counter. That applies to a retiree wintering in Florida as much as to a founder with a US company: the account, the card and the paper trail behind them are what keep ordinary money movements ordinary.
A short checklist for 2026
- Check how you fund transfers. Cash, money orders, cashier's checks and traveler's checks attract the 1 percent. Bank debits and cards do not.
- Do not buy a money order with bank money to send abroad. It is still taxed.
- Compare the card route honestly. Untaxed does not mean free; look at your issuer's treatment of transfer payments.
- Keep the provider's receipt. It should show the tax collected. If a transfer is cancelled and refunded, the refund claim for the tax is yours to make.
- If you are in the United States for more than a season, open the account. The identification rules allow a passport for non-US persons; the rest is choosing a bank that wants the relationship.
Work with Sebastian
If you live between the United States and another country and your banking was built for only one of them, that gap now has a price tag. Sebastian works with internationally mobile clients on multi-jurisdiction banking setups that hold up under compliance review, including US accounts for non-residents; the banking abroad service explains how that work is set up. Book a consultation.
