Choosing the Right Path: DIIRSP vs. Streamlined Domestic Offshore Procedures

IRS Offshore Compliance Options for Foreign Asset Reporting

Many tax practitioners and taxpayers have noticed increased enforcement in the international tax space. It’s always better to correct failures in filing foreign information returns or FBARs before receiving a letter from the IRS.

In certain situations, taxpayers who are living in the United States may want to consider filing the information returns through the IRS’s Delinquent International Information Return Submission Procedures (“DIIRSP”) or the Streamlined Domestic Offshore Procedures. Both programs have key differences and advantages. This article walks taxpayers through the differences and how to submit returns under each program.

What Is DIIRSP?

The DIIRSP allows taxpayers to file overdue international information returns when all related income has already been properly reported and no additional tax is due. Eligible taxpayers may file through normal procedures and include a reasonable cause statement, although penalties may still apply.

Eligibility

Taxpayers are eligible to submit their delinquent information returns through DIIRSP when they have identified the need to file past-due foreign information returns, are not under civil examination or criminal investigation by the IRS, have not already been contacted by the IRS about the delinquent information returns, and timely filed and reported all income necessary to be reported on their original return.

Procedure

Taxpayers who wish to submit their delinquent information returns through DIIRSP must amend all relevant returns to include the necessary foreign information returns. Taxpayers must also attach to each delinquent information return a reasonable cause statement that explains the reasons for the taxpayer’s noncompliance.

Penalties

Taxpayers who successfully demonstrate in their reasonable cause statement that they acted reasonably in the noncompliance and correction of the noncompliance will not incur penalties.

Advantages and Limitations

The most notable advantage of this program is that taxpayers who successfully demonstrate reasonable cause can avoid penalties. As a reminder, the penalties for foreign information returns can be large, ranging from $10,000 to over $100,000 depending on the form. However, the program does have its limitations.

First, unlike the typical six-year look-back period for other IRS programs, DIIRSP does not limit taxpayers to any such look-back period. Because the IRS has an unlimited period of limitations to audit a return involving an unfiled information return, taxpayers must amend all of their returns to include the necessary information returns.

Additionally, taxpayers run the risk that the IRS may assess penalties if it is determined that their statement of reasonable cause is insufficient to avoid penalties. However, in practice, it is rare that the IRS will assess penalties on late-filed foreign information returns submitted through DIIRSP.

Overall, DIIRSP is a great option for taxpayers who timely reported all their income on their original return to become compliant with their foreign asset reporting obligations.

Delinquent international information return submission procedures, Internal Revenue Service, https://www.irs.gov/individuals/international-taxpayers/delinquent-international-information-return-submission-procedures (last visited march 17, 2026)

What Are the Streamlined Domestic Offshore Procedures?

The Streamlined Domestic Offshore Procedures are designed for U.S. taxpayers to resolve foreign asset reporting failures resulting from non-willful conduct. Eligible taxpayers generally amend the last three years of returns, file six years of FBARs, and pay tax, interest, and a 5% offshore penalty in exchange for reduced exposure to other penalties.

Eligibility

Taxpayers who are U.S. residents may be eligible to participate in the Streamlined Domestic Offshore Procedures if they (1) have previously filed a U.S. tax return for the most recent 3 years for which the U.S. tax return was due, (2) have failed to report gross income from a foreign financial asset and may have failed to file an FBAR and/or foreign information return, and (3) the failure was due to non-willful conduct.

Procedure

Taxpayers who wish to submit their delinquent information returns through the Streamlined Domestic Offshore Procedures should amend their past three tax returns to include the necessary income from their foreign assets and the foreign information returns.

Taxpayers will also need to submit the past six years of FBARs, if the taxpayer also has unfiled or delinquent FBARs. Lastly, taxpayers must include a Certification by U.S. Person Residing in the U.S. (Form 14654), which includes a statement regarding why the failure to report the income, foreign information returns, and FBARs resulted from non-willful conduct.

Penalties

Taxpayers must pay all the tax due on the returns, including interest on the late payments of tax. Additionally, taxpayers will owe a penalty equal to 5% of the taxpayer’s total highest aggregate balance of the foreign financial assets.

U.S. taxpayers residing in the United States, Internal Revenue Service, https://www.irs.gov/individuals/international-taxpayers/us-taxpayers-residing-in-the-united-states (last visited March 17, 2026).

The highest aggregate balance is determined by comparing the values of the foreign financial assets on December 31st of each year of the 6-year look-back.

Advantages and Limitations

The main advantage of this program is that it allows taxpayers to avoid the typical penalties on the delinquent foreign information returns and FBARs in exchange for one 5% penalty.

Another advantage of this program is that taxpayers only need to amend their past three returns and file their past 6 FBARs. However, the key limitation of this program is that it is limited to taxpayers who acted non-willfully. Taxpayers who acted willfully in their failure to file such information returns should consider a different option for filing their returns, such as through the Voluntary Disclosure Program.

What Are the Delinquent FBAR Submission Procedures?

The Delinquent FBAR Submission Procedures is a third program worth mentioning. However, the scope of the program is much more limited than DIIRSP or the Streamlined Domestic Offshore Procedures.

Eligibility

Taxpayers who timely reported all income and paid all tax associated with their foreign assets but failed to file necessary FBARs are eligible to submit their FBARs under the Delinquent FBAR Submission Procedures.

Procedure

Taxpayers should prepare FBARs for each year within the past six years that they are required to file an FBAR. The taxpayer should file the FBAR through FinCEN’s e-filing system and include a written statement on the cover page stating that the FBAR is being submitted through the Delinquent FBAR Submission Procedures.

Penalties

As long as the taxpayer timely reported all income required to be shown on the original return, the IRS will not assess penalties for the late-filed FBARs.

IRS Criminal Investigation Voluntary Disclosure Practice, Internal Revenue Service, https://www.irs.gov/compliance/criminal-investigation/irs-criminal-investigation-voluntary-disclosure-practice (last visited March 17, 2026).

Delinquent FBAR submission procedures, Internal Revenue Service, https://www.irs.gov/individuals/international-taxpayers/delinquent-fbar-submission-procedures (last visited March 17, 2026).

Advantages and Limitations

The advantage of this program is that taxpayers can avoid the delinquent FBAR penalties, which can be as high as $165,353 for willful violations. However, the main limitation of this program is that only taxpayers who timely reported the income associated with their foreign assets on their original return are eligible. Taxpayers who did not timely report their income associated with their foreign assets but try to submit delinquent FBARs through these filing procedures run the risk of exposure to the typical FBAR penalties.

Which Offshore Compliance Option Is Right for You?

DIIRSP may be better suited for taxpayers who timely reported all income required to be shown on the return, while the Streamlined Domestic Offshore Procedures are a safer option for taxpayers who failed to report income related to their foreign assets. Taxpayers should carefully review the eligibility criteria of each program to determine the best channel to submit their delinquent foreign information returns.