A Republican proposal to tax remittances would deliver an economic blow to some of the U.S.’s poorest neighbors, including a close ally of President Donald Trump. 

The bill, presented to the House of Representatives last week, would levy a 5% tax on remittances for noncitizens and foreign nationals. That’s on top of a roughly 5% to 10% fee already charged on the payments by senders like Western Union Co. and MoneyGram International Inc., services migrants in the U.S. use to send money to family members back home.

The tax would directly hit payments that represent about one-fifth of the gross domestic product of El Salvador, where President Nayib Bukele has formed a strong alliance with the Trump administration by accepting deportees to be imprisoned. Honduras, which hosts a U.S. military base that has facilitated deportations to Venezuela, gets a similar proportion of remittances to the size of its economy, and Guatemala isn’t far behind.

A MoneyGram transfer location in San Salvador, El Salvador.

“It’s not good news for those who receive remittances,” said Carlos Acevedo, former central bank chief for El Salvador. “It might have a negative impact on economic growth.” 

Migrants from El Salvador, Guatemala and Honduras sent home record amounts of remittances last year, helping drive economic growth across Central America. Remittance flows have surged since Trump took office in January as migrants increase the amount of money they send home in anticipation of being deported. 

The funds are used largely for consumption by poorer families who often have few other sources of income. Mexico and Central America are the world’s most dependent areas for remittances sent from the U.S.  

“The effect isn’t just macroeconomic, it’s at a microeconomic level too, affecting families,” Guatemala Central Bank chief Alvaro Gonzalez Ricci said in a written response to questions. “The importance of remittances to the Guatemalan economy is growing, not just as a proportion of GDP, but also because the flows of millions of dollars boosts family consumption.” 

Gonzalez Ricci said migrants in the U.S. would likely absorb the additional tax, minimizing disruption to the inflows to Guatemala. Some states, especially those with sanctuary cities, will likely oppose the measure, he said. 

However, Manuel Orozco, who researches remittances at the Inter-American Dialogue, a Washington-based think tank, estimates that the proposed tax could lead to a 10% decline in volume of remittances sent and number of transactions.

“That’s very conservative — in other words, it’s your best-case scenario,” he said. “If this were to happen, I can see lots of people going crypto and other people relying on relatives that are U.S. citizens to send money for them.”

Mexican Foreign Affairs Minister Juan Ramon de la Fuente said the government would mount a legal and political defense to stop the plan, while the country’s Ambassador to the U.S. Esteban Moctezuma Barragan urged House representatives to reject the bill in a letter sent May 13. The proposal would mean double taxation of migrant workers who already pay income taxes in the U.S. Mexicans living and working in the U.S. paid $121 billion in taxes in 2021, the ambassador said. 

“Imposing a tax on these transfers would disproportionately affect those with the least, without accounting for their ability to pay,” Barragan wrote. “The workers referenced in this bill migrated out of necessity and now contribute substantially to the U.S. economy. We respectfully urge you to reconsider.” 

Representatives for the governments of El Salvador and Honduras didn’t reply to requests for comment on the tax proposal.

A trade group of digital payment firms — the Electronic Transactions Association — also urged lawmakers to rethink the proposal. The tax would affect unbanked populations who rely on cross-border transfers as lifelines and could force consumers to send money through unregulated channels, they wrote in a letter on May 8.  

“These services are not luxuries — they are essential tools for paying bills, supporting family members abroad and managing daily finances,” the group wrote. “A tax on remittances effectively penalizes those who can least afford it.” 

It’s not the first time Trump has taken aim at remittances. During his first term, his administration proposed a similar tax, but it was never implemented because of legal and technical difficulties to discriminate between trade-related and worker outflows, Barclays analysts Gabriel Casillas and Nestor Rodriguez wrote in a note on May 14.

Oklahoma is the sole state in the U.S. that has implemented a similar policy: a $5 fee on any wire transfer under $500 and 1% on any amount in excess of $500, passed in 2009. In the first year after it was put in place, the state brought in $5.7 million via the rule; that’s climbed to $13.2 million in the most recent fiscal year.

The renewed push for the tax, if approved, could lead to currency depreciations in countries like Guatemala, Honduras and Mexico. But remittances have been resilient even amid recent threats like the COVID-19 pandemic and “such a tax would be a one-time hit rather than a structural change on remittances,” the Barclays analysts wrote.

The U.K.’s accounting watchdog gave a “scathing” and “highly critical” initial report of EY’s conduct in NMC Health Plc’s audit, lawyers for the collapsed hospital operator alleged in the £2 billion ($2.7 billion) trial.

The Financial Reporting Council’s provisional report found EY “demonstrated a complete lack of professional skepticism” and failed “to be alert to conditions that may have indicated possible fraud,” in its last audit of NMC Health for 2018, lawyers for NMC’s administrator, Alvarez & Marsal said in a court filing. 

“EY’s Audit of NMC was deficient in multiple respects. These failings are extremely serious,” the FRC’s provisional report concluded, according to court filings by NMC’s lawyers prepared for the lengthy civil trial.

Alvarez & Marsal sued EY in London alleging negligence and failure to spot billions in hidden debt between 2012 and 2018 when EY was the auditor. NMC was put into administration in 2020 following allegations of fraud at the health care provider. 

EY has “comprehensively challenged” NMC’s arguments around the report, its lawyers said in court filings. EY denies the allegations and said the claims were “unfounded.”

It is a provisional report that has not been made public until now. The FRC made clear at a pre-trial hearing that the report is not regarded as independent expert opinion, according to EY’s lawyers. “The ‘findings’ on which NMC appears to place such a store, and which EY rejects, are in fact inadmissible and should be disregarded.”

An FRC spokesperson didn’t respond to an email for comment on the status of its final report.

The collapse of NMC sparked a flurry of lawsuits and investigations in the U.K. and U.S. as different sides point the finger of blame. The U.K.’s markets watchdog previously censured the fallen Middle Eastern hospital operator, saying the once listed firm misled investors about its debt position by as much as $4 billion.

Leigh Prather/Leigh Prather – Fotolia

It is getting a little difficult to talk about a post-tax filing season after April 15, 2025. With the use of tax extensions and the number of disaster-relief related extensions, many tax return preparers are seeing the tax filing season continue through the summer and fall.

It was the 70th anniversary of the April 15 tax filing deadline this year. Still, the statistics being reported by the Internal Revenue Service look fairly normal compared to the 2024 tax filing season. By April 18, 2025, the IRS reports that 140,633,000 tax returns had been filed, up about 1.1% from 2024. The IRS notes that typically an additional 10% of returns will be filed by the extended tax deadline of Oct. 15, 2025, representing an additional 16% of tax revenue.

(Read more: “2025 tax season wrap up: The final numbers.”)

Further, all or part of 10 states had filing deadlines extended due to natural disasters, with filing deadlines ranging from May 1, 2025, to Nov. 3, 2025. The IRS typically releases an additional filing update in mid-July.

Tax refunds for 2025 of 86,021,000 were similar to 2024. The refund amount was an average of $2,942, up 3.3% from 2024. E-filings by tax professionals were 72,504,000, up by 1.7% from 2024, while self-prepared e-filings were up more modestly to 63,726,000. One interesting statistic from the IRS was that visits to IRS.gov were down significantly from 571,496,000 in 2024 to 322,948,000 in 2025.

The 2025 tax return itself was not too different compared to 2024, except for the usual inflation adjustments. Additional Form 1099-K filings perhaps made the most significant change for 2025 filings.

There were a few provisions from prior tax legislation still coming into effect in 2024, such as the ability to transfer the Clean Vehicle Credit to the dealer, which did result in some confusion and at least temporarily rejected claims for the credit.

Congress in 2024 did not adopt any major tax legislation to add further changes. The 2026 tax filing season could look very different depending upon whether Congress manages to pass new tax legislation this year. Tax professionals will have the expiration of the individual provisions of the Tax Cuts and Jobs Act to deal with if Congress does not act, and potentially new changes to deal with if Congress does act, although it is not clear how many of those changes might be effective for 2025.

Congress

Congress has approved a budget framework for a budget reconciliation tax package with a focus on extending those individual provisions from the Tax Cuts and Jobs Act. However, Congress is also trying to squeeze in some or all of President Trump’s tax proposals, including no tax on Social Security benefits, no tax on overtime, no tax on tips, a possible reduction in the corporate tax rate for domestic manufacturers, a deduction for interest on car loans, and perhaps a modification of the state and local tax deduction limit.

Possible revenue offsets to come within the budget framework numbers include spending cuts, tariff revenue, assumptions about economic growth resulting from the legislation, repeal of some clean energy credits, and using a budget gimmick to assume that extending current provisions in the Tax Code do not require revenue offsets, even though they add to the deficit.

It will be difficult to accomplish everything that congressional Republicans hope to include while also appeasing the deficit hawks among their members and Republican moderates vowing to preserve Medicaid.

The House has already introduced a series of tax bills addressing matters such as timing of receipt of electronic submissions, communication of math adjustments, disaster relief (including tying relief to state as well as federal disaster declarations), the ability to replace stolen checks electronically, and a bill to enhance certain administrative functions.

IRS

For the IRS, along with most of the federal government, it was far from a normal tax season. Having just staffed up for more enforcement, customer service, and technology improvements thanks to funding from the Inflation Reduction Act, the IRS is now facing a possible 25% reduction in its workforce through a deferred resignation program and a voluntary separation incentive program.

In addition, although it is still tied up in the courts, there may still be departures of provisional employees. Leadership at the IRS has also been unstable, with three interim IRS commissioners since IRS Commissioner Daniel Werfel resigned on Jan. 17, 2025.

Other changes announced by the IRS include elimination of the beneficial ownership information reporting requirement for domestic entities and declaring obsolescent a variety of old guidance.

(Read more: “Lessons from tax season.“)

Congress acted to overturn the IRS requirement for crypto broker DeFi reporting on Form 1099-DA. The IRS also announced the withdrawal of the final regulations on partnership basis-shifting transactions involving related parties as a transaction of interest.

However, Revenue Ruling 2024-14 appears to remain in effect, providing that the economic substance doctrine applies where basis shifting among related parties does not have economic purpose or substance. There are also indications that the IRS Direct File program, which was around for 2024 and 2025, will not be continued for future years.

Summary

The relative stability of the 2025 tax filing season is likely to be very different next tax filing season. Congress hopes to pass major tax legislation, some of which will preserve the status quo but other parts of which will present new tax filing challenges.

It is still too early to ascertain the impact on the IRS; however, the loss of so many employees and leadership turnovers point to less enforcement and compliance activity, and less revenue collected from such activities, including a pullback of the effort to increase partnership audit activity. There could also be a return to declines in customer service.

At the American Bar Association Tax Section meeting in Los Angeles in February 2025, no representatives of the Treasury or the IRS were permitted to attend or participate in the usual discussion panels.

At the time of this writing, the next meeting of the Tax Section was due in mid-May, in Washington, D.C. It will be interesting to see if government panelists are permitted to go the few blocks to the conference. Usually, the exchange of ideas is very helpful to the tax professionals in attendance and to the government personnel seeking comments on proposed guidance.