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Signed into law as part of the One Big Beautiful Bill Act on July 4, 2025, a new 5% remittance tax has sparked concern among crypto traders, ecommerce sellers, freelancers, and investors with foreign ties. The tax applies to certain outbound foreign payments, raising new compliance risks and costs for those involved in international transactions.
If you run a small business, invest offshore, or freelance for overseas clients, here’s what you need to know about this 2025 remittance tax, who it applies to, and how to stay compliant.
What Is the 2025 Remittance Tax?
The remittance tax is a 5% levy on specific foreign financial transfers, designed to generate revenue and tighten reporting on foreign income and crypto-related activity. It is triggered when U.S.-based individuals or entities send qualifying payments abroad, particularly if those payments are:
- Made to foreign accounts or wallets
- Transferred via cryptocurrency
- Sent as compensation or dividends to non-U.S. parties
- Associated with ecommerce or international freelancing
The new rule is a major part of the federal government’s efforts to modernize crypto tax reform and crack down on underreported foreign income.
What Counts as a “Remittance” Under the New Law?
According to the bill, a “remittance” includes any financial transaction from a U.S. source to a non-U.S. recipient, especially if the funds are tied to:
- Digital assets or crypto wallets
- Offshore investment accounts
- Foreign contractors or freelancers
- Foreign-based dropshipping or fulfillment centers
For example:
- A U.S. crypto trader sending funds to an overseas exchange = Taxable
- A small business paying a developer in the Philippines = Taxable
- Sending profits to an offshore holding company = Taxable
This could significantly impact digital entrepreneurs, freelancers, and small businesses operating internationally.
Compliance Challenges for Small Businesses & Freelancers
For the first time, U.S.-based businesses and independent workers may need to:
- Track and report outbound payments
- Withhold and remit the 5% tax
- File new IRS remittance disclosures
Failure to comply could result in IRS audits, fines, or even fraud investigations.
If you’re unsure about your tax situation, our IRS Audit Representation and Tax Resolution Services can help you respond confidently and stay protected.
Who Is Exempt from the 2025 Remittance Tax?
Not all foreign payments are taxed. The following are exempt from the new remittance tax:
- Personal gifts or remittances to family members abroad (below $10,000/year)
- Charitable donations to qualified foreign nonprofits
- Education-related transfers (e.g., tuition for study abroad)
- Medical payments to non-U.S. facilities
Also, foreign entities with valid U.S. tax treaties may be partially or fully exempt — though documentation is required.
How to Prepare Now
Even if your 2025 remittances won’t trigger this tax immediately, it’s wise to:
- Review all foreign payment activities
- Segregate personal vs. business transactions
- Document every transfer with purpose and recipient data
- Consult a tax professional for compliance strategy
If you receive a notice or are unsure about past transfers, Priority Tax Relief can guide you through tax resolution or audit protection.
Frequently Asked Questions: What the 2025 Remittance Tax Could Mean for Investors & Small Business Owners
Who is affected by the 2025 remittance tax?
Any U.S.-based individual or business sending qualifying financial transactions to foreign accounts or recipients may be subject to the new 5% remittance tax.
Does this include cryptocurrency transfers?
Yes. If you’re transferring crypto from a U.S. wallet to a foreign exchange or wallet, that can be considered a taxable remittance under the law.
Are freelancers and digital nomads impacted?
Yes. If you’re paying overseas virtual assistants, freelancers, or suppliers, you may need to withhold and report the remittance tax.
Is the 5% tax automatically withheld?
Not yet. The payer is responsible for tracking, withholding, and reporting the 5% remittance tax unless a platform (e.g., bank or processor) does it on your behalf.
What if I send money to my family abroad?
Personal gifts under $10,000/year per recipient are exempt, as long as they’re not tied to business income or services rendered.
What documents should I keep for remittance compliance?
Keep records of:
- The reason for payment
- Recipient details (individual vs. business)
- Amounts, currencies, and transfer methods
- Any tax treaty documentation
