New IRS Penalty Relief for Remittance Transfer Providers: What Businesses Need to Know

In October 2025, the U.S. Department of the Treasury and the IRS issued new guidance providing penalty relief for remittance transfer providers who may struggle to comply with the new excise tax under the One, Big, Beautiful Bill (OBBB).

This is an important development for businesses handling international or domestic money transfers — and one that could impact compliance and cash flow in early 2026.

At Velin & Associates, Inc., we help businesses in Los Angeles and across California stay ahead of new tax laws like this one, minimizing penalties and ensuring smooth reporting.

🔍 What Changed

Beginning January 1, 2026, remittance transfer providers — such as businesses facilitating cash, money order, or cashier’s check transfers — will be subject to a new 1% remittance transfer tax.
This excise tax must be collected from the sender and deposited with the IRS twice per month (semimonthly deposits).

The first deposit is due January 29, 2026, and businesses will also need to file Form 720 (Quarterly Federal Excise Tax Return) to report and pay the tax.

Penalty Relief for 2026

Recognizing that implementing this new tax could pose administrative challenges, the IRS has announced temporary penalty relief for the first three quarters of 2026.

Under Notice 2025-55, remittance transfer providers can avoid penalties if they:

1. Make timely deposits, even if the amount is incorrect, and

2. Pay the full underpayment by the due date of their Form 720 for that quarter.

Additionally, businesses can rely on safe harbor rules under the Excise Tax Procedural Regulations if they demonstrate reasonable cause for any deposit discrepancies.

What This Means for Businesses

This relief is designed to give companies time to adjust accounting systems, train staff, and update payment processing procedures before the IRS begins full enforcement.

However, once the relief window closes at the end of Q3 2026, any underpayment or late deposit could result in significant penalties.

If your business facilitates money transfers — even indirectly — this change affects you. Having a proactive CPA who understands compliance rules can prevent costly mistakes.

Example: How It Might Apply

Let’s say you operate a financial service in Los Angeles that handles customer wire transfers using money orders.

• In February 2026, you collected $100,000 in qualifying transfers.

• The new 1% tax means you owe $1,000 for that period.

• If your system mistakenly deposits $900 instead of $1,000 but the full balance is paid by the due date of Form 720 — you’re protected from penalties under this relief.

This small grace period allows businesses to fine-tune internal tracking before enforcement begins in full.

How Velin & Associates, Inc. Can Help

Tax law changes like this one demonstrate how quickly compliance requirements can evolve. Whether you run a Shopify store, medical practice, creative business, or financial operation, accurate bookkeeping and timely reporting are critical.

Our firm works closely with a range of professionals and industries:
CPA for YouTubers | CPA for Shopify Store | CPA for Online Commerce | CPA for Creators | Shopify Store CPA | CPA for Filmmakers | CPA for Amazon Business | Amazon Business CPA | CPA for Dental Practice | Dentist CPA | Dental Business CPA | Online Commerce CPA | CPA for TikTokers | CPA for Doctors | CPA for Medical Practice | CPA for High Net Worth Individuals | CPA for Attorneys and Law Firms

We monitor IRS updates and legislative changes to keep your business compliant — and help you plan for what’s next.

For more information about our tax planning services, contact us today: visit our website.

Velin & Associates, Inc

8159 Santa Monica Blvd STE 198/200 West Hollywood, CA 90046
323-902-1000
dmitriy@losangelescpa.org