IRS Grants Temporary Penalty Relief for US International Money Transfer Tax in 2026

The IRS announced a 1% federal excise tax on international money transfers involving physical payment instruments such as cash, money orders, and cashier’s checks, effective January 1, 2026, impacting financial institutions and money transfer companies like Western Union and MoneyGram. To ease the transition, the IRS is providing a penalty relief period for the first three quarters of 2026, during which companies will not face failure-to-deposit penalties if they make timely deposits or correct underpayments by the quarterly tax return deadline. This grace period applies only to failure-to-deposit penalties and does not exempt companies from other compliance requirements, such as timely filing of Form 720. The tax does not apply to transfers funded by U.S.-issued debit or credit cards or direct bank withdrawals. Separately, public interest surged concerning alleged new IRS relief payments for 2025, fueled by viral misinformation on social media; however, officials clarified no new stimulus payments are planned, with only legitimate catch-up payments linked to past COVID-era stimulus credits currently being issued. The IRS and Treasury emphasize that recent tax policy changes and existing Recovery Rebate Credit payments have been misrepresented online, leading to widespread confusion.