Use Digital Channels To Avoid US Remittance Tax, International Money Transfer Operators Advise Migrants

Following the January 1, 2026 kick off of the United States of America (USA) remittance tax, International Money Transfer Operators (IMTOs) have stepped up advocacy for digital remittance channels, raising concerns among migrants who rely on cash-based transfers to support families abroad.

Under the new law, formally known as the One Big Beautiful Bill Act, the US government will impose a one per cent excise tax on international money transfers funded with cash or cash-like instruments, such as money orders and cashier’s checks.

The tax is to be collected by remittance providers at the point of transaction and remitted to the Internal Revenue Service.

The policy has drawn significant attention across migrant communities, particularly Africans and Nigerians in the United States, for whom remittances remain a major lifeline for household consumption, education, healthcare and small business support back home.

However, leading IMTOs, including World Remit, Remitly and Western Union, have said the impact of the new tax can be avoided entirely by switching to digital payment methods, which are explicitly exempt under the law.

According to WorldRemit, the one per cent charge applies strictly to physical payment types. These include cash paid at agent locations, money orders and cashier’s checks. Transfers funded through US-issued bank accounts, debit cards, credit cards, or digital wallets are not affected.

The digital remittance company noted that many migrants who still rely on older paper based methods risk losing part of the money meant for their families if they do not adjust their payment habits.

For WorldRemit customers, the company stated that there is no cause for concern, as it operates as a fully digital platform and does not accept cash or paper instruments. As a result, all transfers made through its app or website remain completely exempt from the remittance tax, adding that customers will continue to enjoy tax-free transfers, competitive exchange rates and the convenience of sending money anytime without visiting physical locations.

Remitly also confirmed that its transfers fall outside the scope of the new tax. In its 2026 US Federal Remittance Tax Guide, the company explained that the law targets only cash-based or physically funded transactions typically associated with in-person agents.

Citing Section 4475 of the US Internal Revenue Code and IRS Notice 2025 55, Remitly said the tax applies when senders fund transfers with physical instruments. Transfers funded electronically through bank accounts, debit cards, credit cards, or digital wallets such as Apple Pay and Google Pay are exempt.

The company emphasised that, as Remitly is a 100 per cent digital service, none of its transactions are subject to the new excise tax. Customers will therefore continue to pay only standard transfer fees without any tax-related increase.

Western Union, while acknowledging that a segment of its customers still rely on cash payments at retail locations, clarified that the remittance tax does not affect recipients abroad and does not reduce the amount they receive. Instead, the tax is borne solely by the sender, depending on the payment method used.

Western Union outlined several alternatives for customers who wish to avoid the tax while continuing to use its services. These include paying with debit or credit cards at agent locations, using bank accounts, digital wallets, or prepaid cards, or sending payments directly through its website or mobile app.

According to the company, customers who insist on cash payments from 2026 will see an automatic one per cent increase in the cost of each transaction. Thus, a US resident who wishes to send $1,000 to Nigeria via any IMTO using cash or other cash-based methods, such as checks or money orders, will pay a $10 tax in addition to other transfer charges.