Keywords: IRS streamlined filing compliance procedures, delinquent international information return submission procedures, unreported foreign income, offshore compliance, foreign asset reporting, Form 8938, FBAR, international tax

When You Missed Foreign Income but Owe No Extra Tax

You may have discovered that a foreign bank account earned a small amount of interest or dividends that you didn’t report on your U.S. tax return. After reviewing your numbers, you realize that your total U.S. tax bill doesn’t change — maybe because of offsetting deductions, foreign tax credits, or losses.

Now you and your advisor are wondering:

Should I use the Delinquent International Information Return Submission Procedures (DIIRSP) or the Streamlined Filing Compliance Procedures to fix this?

The answer depends on how the IRS defines “unreported income.”

1. Understanding the Two IRS Options

Delinquent International Information Return Submission Procedures (DIIRSP)

DIIRSP is meant for taxpayers who:

• Forgot to file international information forms (like Form 8938, Form 5471, or Form 3520),

• Have reasonable cause for the failure, and

• Have no unreported income or unpaid tax related to those forms.

If you reported all of your income correctly but just missed a form, DIIRSP can help you become compliant without heavy penalties.

Streamlined Filing Compliance Procedures

The Streamlined Procedures (Domestic or Foreign) are designed for taxpayers whose mistakes were non-willful — unintentional or due to misunderstanding, not concealment.

They apply if you:

• Failed to report foreign financial assets or foreign income, and

• Need to amend prior returns and pay any tax due related to those assets.

The domestic version includes a 5 % miscellaneous offshore penalty; the foreign version usually does not.

2. The Gray Area: You Missed Income, But Owe Nothing Extra

Here’s the tricky situation:
You did fail to report gross income — maybe $200 of foreign interest — but the offsetting deductions or credits mean there’s no increase in taxable income or tax due.

You might think:

“Since I didn’t owe any more tax, DIIRSP should be fine.”

But DIIRSP is only for taxpayers who truly have no unreported income at all. Once you’ve left out any gross income — no matter how small — you don’t meet DIIRSP’s criteria.

3. Why the Streamlined Procedures Fit Better

The Streamlined Filing Compliance Procedures were created for exactly this type of mistake — where a taxpayer failed to report all income but wasn’t being willful.

The IRS’s own FAQ 6 for the Streamlined Domestic Offshore Procedures says the offshore penalty base includes foreign financial assets “for which gross income was not reported.”

That language tells us that the focus is on whether gross income was reported — not whether taxable income changed. So even if the unreported income doesn’t change your tax due, the Streamlined Procedures are the more accurate and defensible route.

4. Which Option Should You Use?

If any income was unreported — even if it didn’t change your tax — the Streamlined Procedures are generally safer because they require disclosure of the income itself, not just the tax effect.

Please also note that DIIRSP only cures the year when you filed the package. Non-filed years are still open because the statute of limitations has not run. On the other hand, Streamlined procedures are meant to be done once, and you are supposed to conform the rules prospectively. You do not have to worry prior years unless the IRS finds any element of fraud. 

5. Key Takeaway

When you’ve omitted any foreign income, DIIRSP likely doesn’t apply. The Streamlined Filing Compliance Procedures provide a cleaner, safer way to fix the issue — showing the IRS that your oversight was non-willful and that you’re taking steps to correct it.

It’s always better to resolve these matters proactively than wait for the IRS to ask questions later.

⚠️ Disclaimer

This article is for general informational purposes only and does not constitute legal or tax advice. Every situation is unique, and IRS programs can change.
Before making any submission, consult a qualified international tax attorney or CPA who can review your facts and recommend the most appropriate compliance path.