Sending money abroad and the remittance tax

This guide is for you if you send money to family in another country. A federal law now taxes certain remittances. You will see which transfers it applies to according to the law, which it does not, who pays it and who collects it, and the rights federal rules give you every time you send money: seeing the costs before you pay, canceling and reporting errors.

Federal tax on the amount of a remittance paid with cash, a money order or a cashier's check

1%¹

To cancel at no cost after paying, if the money has not been picked up

30 minutes⁷

For your refund if you canceled in time

3 business days⁷

To report an error, from the date the money was supposed to be available

180 days⁹

What the remittance tax is

A remittanceremittance transferA remittance transfer is an electronic money transfer you send from the United States to a person or company in another country through a remittance transfer provider, such as a bank or another financial services company. Federal law protects transfers above a minimum amount made by a provider in the normal course of its business. The provider must tell you, before and after you pay, the fees, taxes, exchange rate and how much the other person will receive, in your language if it advertises in it or served you in it. You have up to thirty minutes to cancel at no charge, if the money has not been picked up, and one hundred eighty days to report an error.See the full definitionClose is money you send from the United States to someone in another country through a provider, such as a money transfer company or a bank.⁵ Federal law (26 U.S.C. §4475) imposes a tax equal to 1% of the amount of the remittance, and it applies to transfers made after December 31, 2025.¹

According to the IRS, the tax applies to remittances from the United States to recipients in foreign countries when the sender gives the provider cash, a money order, a cashier’s check or another similar physical instrument.³ The law uses the definitions of “remittance transfer,” “provider” and “sender” from the Electronic Fund Transfer Act.¹

Which transfers it applies to and which it does not

The law is specific about how you pay. The tax applies only when you give the provider cash, a money order, a cashier’s check or another similar physical instrument, as the Treasury determines.¹ And the same law says it does not apply in two cases:¹

1. When the money is withdrawn from an account at a financial institution named in the law. That list includes insured banks, commercial banks, U.S. branches of foreign banks, any credit unioncredit unionA credit union is a not-for-profit financial institution that, like a bank, accepts deposits, makes loans and offers other services, but is owned by its members. Members elect a volunteer board of directors, and profits go back to them as lower fees, higher savings rates and lower loan rates. To join you need a common bond, such as your employer, your family, where you live or a group you belong to. It is chartered by the NCUA, a federal agency, or by a state. If the credit union is federally insured, your deposits are protected by the NCUA's insurance fund.See the full definitionClose and thrift institutions.²
2. When you pay with a debit or credit card issued in the United States.¹

How you pay and what the law says

The tax applies

Cash, money order or cashier's check

• The law imposes 1% of the remittance amount.¹
• Another similar physical instrument also counts, as the Treasury determines.¹

Does not apply

From a bank or credit union account

• The law excludes money withdrawn from an account at a financial institution on its list.¹
• The list includes insured banks, credit unions and thrift institutions.²

Does not apply

With a U.S.-issued debit or credit card

• The law excludes remittances funded with a card issued in the United States.¹

Whatever way you pay, you have the right to see the fees, taxes and exchange rate before you pay.⁶

The law also has a special rule for multiple-party arrangements involving the sender: in those cases, the remittance is treated as a financing transaction under the tax code’s “anti-conduit” rule.¹ If you have questions about how it applies to your situation, ask the IRS directly.

Who pays it and who collects it

The sender pays the tax. The provider collects it from you at the time of the transfer and sends it to the Treasury every quarter. If the provider does not collect it at the time of the transfer, the law says the provider must pay it.¹ The IRS puts it the same way: the sender is liable for the tax, and if the provider does not collect it, it becomes the provider’s liability.³

The provider reports the tax to the IRS on Form 720, the Quarterly Federal Excise Tax Return.⁴ And when you send money, Regulation E requires the pre-payment disclosure to show the fees the provider charges and the taxes it collects, labeled “Transfer Fees” and “Transfer Taxes” or something similar.⁶

Your rights every time you send money

Beyond the tax, federal law protects you. According to the CFPB, a remittance is an electronic transfer of more than $15 that you send from the United States to a person or company in another country through a provider. A bank or other financial company can be a provider. But if a company made 500 or fewer transfers last year and makes 500 or fewer this year, it does not count as a provider, and federal law does not require it to give you these protections.⁵

Before you pay, the provider must give you a disclosure with the amount transferred, the fees, the taxes it collects, the total, the exchange rate and the amount the person will receive. When you pay, it must give you a receipt with that information, the date the money will be available and your rights to report errors and cancel.⁶ Where it applies, the disclosure also tells you that foreign taxes and fees may be deducted in the other country.⁵

In your language. The law generally requires the provider to use your language on receipts and disclosures if it uses that language in its advertising where you send money, or if you made the transfer in that language.⁵

Example with real numbers

What to check on the disclosure before you pay

An example of the lines Regulation E requires; the labels may be similar rather than identical.

Transfer Amount

The amount transferred to the recipient

Transfer Fees

The fees the provider charges you

Transfer Taxes

The taxes the provider collects on the transfer

Exchange Rate

The exchange rate the provider uses

Total

The amount transferred plus the fees and taxes

That is what Regulation E requires.⁶ If your transfer is paid with cash, a money order or a cashier's check, the 1% tax is one of the taxes the provider collects.¹ Track your monthly transfers in the budget tool.

Run it with your numbersFamily budget

Canceling a transfer or reporting an error

Under Regulation E, you can cancel if you ask no later than 30 minutes after paying, with enough information to identify you and the transfer, and if the money has not been picked up or deposited. The provider must refund everything you paid, including fees and, to the extent the law does not prohibit it, taxes, within three business days.⁷ If you scheduled the transfer in advance, you can cancel up to three business days before it is made; sometimes state law or the provider’s own rules give you more time.⁸

If something went wrong, the provider must handle your notice of error if it receives it no later than 180 days after the availability date it gave you. It must investigate within 90 days and give you the results within three business days after that.⁹

One transfer, start to finish

1. 1. Ask for and review the disclosure

   Before you pay

   Amount, fees, taxes, total and exchange rate, in your language if the provider advertises in it.⁶

2. 2. Pay and keep the receipt

   When you pay

   The receipt shows the date the money will be available and your rights.⁶

   Try it with your numbersFamily budget

3. 3. Changed your mind? Cancel

   Within 30 minutes

   If the money has not been picked up, you get everything you paid back within three business days.⁷

4. 4. If there is an error, report it

   Within 180 days

   Counted from the availability date on the receipt; report it right away and then in writing.¹⁰

5. 5. The provider investigates

   Up to 90 days

   It gives you the results within three business days after it finishes.⁹

6. 6. If it is not resolved, complain

   After its answer

   You can file a complaint with the CFPB; its phone number and website are on your receipt.¹⁰

How to report an error. According to the CFPB, contact the provider right away; it may help to follow up in writing with your name and phone number or address, the recipient’s, the amount and what happened. Errors the provider must correct include delivering the wrong amount, not delivering the money on time or at all, and delivering it to the wrong person.¹⁰ If the money never arrived, you may get a refund or have it resent.⁵

Watch out for one case: if the mistake happened because you gave a wrong account or routing number and the provider took certain steps, it does not have to refund or resend the money. And some banks and credit unions are exempt from the federal error protections.¹⁰ If the problem is not solved, you can file a complaint with the CFPB, and for your state’s laws you can contact your state attorney general or financial regulator.¹⁰

If this is you

You are paid in cash and send in cash

The law imposes the 1% tax when you pay for the remittance with cash, a money order or a cashier's check.¹¹

You do not have a Social Security number

Many banks open accounts with a passport, consular ID or ITIN;¹² the law does not impose the tax when the money comes out of a bank or credit union account.¹

You send money every month

Keep every receipt: you have 180 days from the availability date to report an error.⁹

You prefer to do it in Spanish

If the provider advertises in Spanish where you send money, it generally must give you the disclosure and receipt in Spanish.⁵

Mistakes that cost you money

• Mistake: Paying without reviewing the disclosure.

  Instead: Before you pay, check the fees, taxes, total and exchange rate.⁶

• Mistake: Throwing away the receipt.

  Instead: Keep it: it has the availability date and the phone numbers for complaints.¹⁰

• Mistake: Waiting months to report that the money did not arrive.

  Instead: Report it as soon as you can; the deadline is 180 days from the availability date.⁹

• Mistake: Giving the recipient's account number in a hurry.

  Instead: Check it twice: if the mistake was yours, the provider may not have to refund you.¹⁰

• Mistake: Assuming a transfer can never be canceled.

  Instead: You have 30 minutes after paying, if the money has not been picked up.⁷

What to do this week

1. Look at how you pay for your transfers: the law imposes the tax only when you pay with cash, a money order, a cashier’s check or another similar physical instrument.¹
2. On your next transfer, ask for the disclosure before you pay and check the fee and tax lines.⁶
3. Keep your transfer receipts in one place.¹⁰
4. If a transfer did not arrive, tell the provider today and then in writing.¹⁰
5. If you have questions about your own tax return, look for an IRS VITAVITA (free tax preparation)VITA (Volunteer Income Tax Assistance) and TCE (Tax Counseling for the Elderly) are IRS programs that offer free basic tax return preparation by IRS-certified volunteers. They are meant for people with moderate income, people with disabilities and limited-English speakers; TCE focuses on people sixty and older. The IRS sets no program-wide income limit, but individual sites may set their own. Many sites serve in Spanish and help with ITIN applications and renewals. Filing taxes every year builds the record lenders ask for.See the full definitionClose site, which prepares basic returns for free for people who qualify.¹¹
6. Add your transfers to your family budget to see how much you send each month.