MSBA urges IRS to ease remittance tax compliance rules

The Money Services Business Association has filed comments with Treasury and the IRS on proposed rules for the federal excise tax on remittance transfers under Section 4475. The group says parts of the framework would create heavy compliance costs for money transmitters and small retail agents that handle transfers for consumers and small businesses. Why it matters: - The proposed remittance tax rules could change how money transmitters and their retail agents process, report and pay the federal excise tax on transfers. - MSBA says the current framework could add costs and complexity for thousands of small businesses that operate as independent retail agents. - The association says those burdens could also increase consumer confusion. What happened: - The Money Services Business Association submitted a formal comment letter to the U.S. Department of the Treasury and the IRS on proposed regulations for the remittance transfer tax under Section 4475 of the Internal Revenue Code. - MSBA represents licensed money transmitters, payment providers and other companies that help consumers and small businesses send money domestically and internationally. - Kathy Tomasofsky, MSBA’s executive director, said providers support clear regulation, but the rules must be practical and workable for the businesses that must implement them. - Tomasofsky said many providers rely on extensive networks of small retail locations that would face significant new administrative and compliance burdens. The details: - MSBA asked Treasury and the IRS to narrow or eliminate the anti-avoidance provision. - MSBA asked the agencies to replace semi-monthly deposits with quarterly payments. - MSBA asked the agencies to apply the tax only to completed transfers. - MSBA asked the agencies to allow refunds for canceled or failed transfers. - MSBA asked the agencies to exempt provider-paid bonuses and rewards. - MSBA asked the agencies to extend transition relief to at least Jan. 1, 2028. - The association said the remittance industry depends heavily on thousands of independently operated retail agents. - Many of those agents are small businesses such as grocery stores and convenience stores. - MSBA said the proposed requirements create substantial operational strain for those businesses. Between the lines: - MSBA is pressing for a less rigid compliance model that reflects how remittance transfers are actually handled at the retail level. - The group’s comments suggest the biggest friction points are timing of tax deposits, treatment of failed transactions and the breadth of anti-avoidance language. - The request for transition relief through 2028 signals the industry wants a longer runway before the rules take full effect. What’s next: - Treasury and the IRS will continue reviewing comments as the regulations move toward finalization. - MSBA said it looks forward to continued engagement with both agencies. - The final rules could determine how quickly providers must retool systems and train retail agents for compliance. - MSBA on LinkedIn