Remittance tax 1 percent LLC transfers: what is exempt

Federal tax law (IRC §4475) imposes a 1 percent tax on remittance transfers made after December 31, 2025 (Cornell LII: IRC §4475). It applies only when the sender gives the provider cash, a money order, a cashier's check or a similar physical instrument. Exempt: funds withdrawn from an account at a financial institution that meets the statute's two tests, and transfers funded with a US-issued debit or credit card.

What the 1% remittance tax is

The 1% remittance tax is a federal tax on certain remittance transfers. It is set out in section 4475 of the Internal Revenue Code (IRC) (Cornell LII: IRC §4475). Section 4475(a) imposes a tax equal to 1 percent of the amount of a remittance transfer. In the statute's words: “There is hereby imposed on any remittance transfer a tax equal to 1 percent of the amount of such transfer.”

The tax applies to transfers made after December 31, 2025 (Cornell LII: IRC §4475). That makes 2026 its first year.

“Remittance transfer” is a defined legal term borrowed from another law. The section on senders below explains where it comes from.

What transfers are taxed and exempt

The tax covers only remittance transfers that the sender funds with cash or a similar physical instrument. The statute reads: “The tax imposed under subsection (a) shall apply only to any remittance transfer for which the sender provides cash, a money order, a cashier’s check, or any other similar physical instrument (as determined by the Secretary) to the remittance transfer provider” (Cornell LII: IRC §4475). So the Secretary decides what else counts as a “similar physical instrument.” The provider is the business that carries out the transfer.

The same section sets out two exemptions:

• Account withdrawals. The tax does not apply to remittance transfers of funds withdrawn from an account held in or by a financial institution that is described in subparagraphs (A) through (H) of section 5312(a)(2) of title 31 and is subject to the requirements under subchapter II of chapter 53 of title 31 (Cornell LII: IRC §4475; Cornell LII: 31 U.S.C. §5312). Both tests are about the institution that holds the account. Both must be met.
• US-issued cards. The tax does not apply to remittance transfers funded with a debit card or a credit card issued in the United States (Cornell LII: IRC §4475).

The table below summarizes those rules; the wording follows the statute:

How the sender funds a remittance transfer	1% tax under IRC §4475	Source
Gives the provider cash, a money order, a cashier's check or any other similar physical instrument (as determined by the Secretary)	Applies	Cornell LII: IRC §4475
Funds withdrawn from an account held in or by a financial institution described in subparagraphs (A) through (H) of section 5312(a)(2) of title 31 and subject to the requirements under subchapter II of chapter 53 of title 31	Does not apply	Cornell LII: IRC §4475
A debit card or a credit card issued in the United States	Does not apply	Cornell LII: IRC §4475

Remittance tax 1 percent LLC transfers: who counts as a sender

The meaning of “sender” comes from another federal law, the Electronic Fund Transfer Act (EFTA). Section 4475 says the terms “remittance transfer”, “remittance transfer provider” and “sender” each have the meanings given by section 919(g) of that act (Cornell LII: IRC §4475; Cornell LII: 15 U.S.C. §1693o-1).

Those definitions settle two points: whether a payment is a “remittance transfer” at all, and who its “sender” is. The tax rule and both exemptions turn on these terms.

Whether a payment from a business account, such as your LLC's, fits those definitions is a question for your CPA or enrolled agent. Ask before you rely on any reading of them. If you do not have one yet, see whether a foreign-owned LLC needs an accountant.

How the tax is paid and collected

The sender pays the tax, and the provider collects it. Section 4475 says the tax “shall be paid by the sender with respect to such transfer” (Cornell LII: IRC §4475). The remittance transfer provider collects the tax from the sender. It then remits it (pays it over) quarterly to the Secretary. If the tax is not paid when the transfer is made, the provider pays the amount it did not collect.

The IRS describes the provider's side in its instructions for Form 720. Form 720 is an IRS return (IRS: About Form 720), and its instructions list this tax as IRS No. 155. They say providers “are required to collect the remittance transfer tax from certain senders, make semimonthly deposits, and file quarterly returns” (IRS: Instructions for Form 720). Semimonthly means twice a month.

This article covers only the remittance tax. Related pages: the guide for foreign-owned US LLCs and the federal tax calendar.

Quick answers

When did the 1% remittance tax start?

The tax applies to transfers made after December 31, 2025, which makes 2026 its first year (Cornell LII: IRC §4475). The rate is 1 percent of the transfer amount. Only transfers the sender funds with cash or a similar physical instrument are taxed.

Is a bank wire from my LLC's bank account subject to the remittance tax?

If the funds are withdrawn from an account held in or by a financial institution that meets both statutory tests (it is described in subparagraphs (A) through (H) of section 5312(a)(2) of title 31 and is subject to the requirements under subchapter II of chapter 53 of title 31), the tax does not apply (Cornell LII: IRC §4475). Only transfers funded with cash or a similar physical instrument are taxed. Ask a tax professional whether your LLC's account and transfer fit those definitions.

Who pays the remittance tax, the sender or the transfer company?

The sender pays the tax, section 4475 says (Cornell LII: IRC §4475). The remittance transfer provider collects it from the sender and remits it quarterly to the Secretary. If the tax is not paid when the transfer is made, the provider pays the amount it did not collect. The IRS Form 720 instructions add that providers make semimonthly deposits and file quarterly returns (IRS: Instructions for Form 720).

Where Taxller fits

Money you put in or take out, and loans between you and the LLC, are kept separate in your books — the owner transactions that Form 5472 asks about. Our free tax calendar lists the federal deadlines for sellers and the state deadlines for 12 states, with weekend shifts applied and sources cited. Taxller never files or pays anything on your behalf: you or your accountant review and file.

Sources

• 26 U.S. Code § 4475 - Excise tax on remittance transfers
• Instructions for Form 720 - Introductory Material (IRS No. 155 remittance transfers)
• IRS: About Form 720
• Cornell LII: 15 U.S. Code § 1693o-1
• Cornell LII: 31 U.S. Code § 5312