Delinquent International Information Return Submission Procedures

Foreign Nationals & Expats

Houston Tax Attorney


Delinquent International Information Return Submission Procedures

Since the 2014 OVDP changes some taxpayers with unreported income from unreported foreign assets have opted to file under the Delinquent International Information Return Submission Procedures (DIIRP). Such taxpayers have done so presumably to avoid the 5% miscellaneous offshore penalty under the Streamlined Domestic Offshore Procedures (SDOP).

On the other hand, many practitioners assume that when a taxpayer has unreported income from foreign sources they are precluded from using DIIRP. Since the 2014 changes to the OVDP program, this is no longer the case. Here’s a brief comparison of the two programs.

What are the Delinquent International Information Return Submission Procedures?

These procedures are one of the four methods for taxpayers with unreported offshore accounts to become compliant.

Can I use this program if I also have unreported income from foreign assets?

The answer is ‘yes’. While taxpayers with unreported foreign income were previously precluded from using these procedures, this is not the case since the 2014 changes to the program. The IRS specifically addressed this issue in a Q&A:

Q1 Are the Delinquent International Information Return Submission Procedures announced on June 18, 2014 different from the procedures described in 2012 OVDP FAQ 18 (in effect prior to July 1, 2014)?

Yes. The IRS eliminated 2012 OVDP FAQ 18, which gave automatic penalty relief, but was only available to taxpayers who were fully tax compliant. The Delinquent International Information Return Submission Procedures clarify how taxpayers may file delinquent international information returns in cases where there was reasonable cause for the delinquency. Taxpayers who have unreported income or unpaid tax are not precluded from filing delinquent international information returns. Unlike the procedures described in OVDP FAQ 18, penalties may be imposed under the Delinquent International Information Return Submission Procedures if the Service does not accept the explanation of reasonable cause. The longstanding authorities regarding what constitutes reasonable cause continue to apply, and existing procedures concerning establishing reasonable cause, including requirements to provide a statement of facts made under the penalties of perjury, continue to apply. See, for example, Treas. Reg. § 1.6038-2(k)(3), Treas. Reg. § 1.6038A-4(b), and Treas. Reg. § 301.6679-1(a)(3).

What are the requirements to file under this program?

Taxpayers who do not need to use the OVDP or the Streamlined Filing Compliance Procedures to file delinquent or amended tax returns to report and pay additional tax, but who:

• have not filed one or more required international information returns,
• have reasonable cause for not timely filing the information returns,
• are not under a civil examination or a criminal investigation by the IRS, and
• have not already been contacted by the IRS about the delinquent information returns

Is there a penalty under this program?

Unlike streamlined domestic offshore procedures (SDOP), there is no miscellaneous offshore penalty under DIIRP.  Failure-to-pay penalties and interest would still apply for any additional tax assessed on amended returns filed, if applicable.

Streamlined Domestic Offshore Procedures vs. Delinquent International Information Return Submission Procedures

At first glance, the delinquent international return procedures seem to be a “loophole” for becoming compliant without paying a miscellaneous offshore penalty. However, there are very important caveats and serious risks associated with this program. DIIRP requires a statement of facts establishing reasonable cause for the failure to file the informational return(s) and must be attached to each such return under penalties of perjury. The SDOP on the other hand requires a certification of non-willfulness to be attached to each return under penalties of perjury.

What is the difference between “reasonable cause” vs. “non-willful”

Reasonable cause is an affirmative showing that places the burden of proof on the taxpayer. While the elements of what constitute reasonable cause are a question of law, whether those elements are present in a given case are questions of fact. The statutory sources and Internal Revenue Manual guidelines for establishing reasonable cause under the law can be summed up as follows:

Reasonable cause is based on all the facts and circumstances in each situation and allows the IRS to provide relief from a penalty that would otherwise be assessed. Reasonable cause relief is generally granted when the taxpayer exercises ordinary business care and prudence in determining their tax obligations but nevertheless is unable to comply with those obligations.

Examples of what constitute reasonable cause:

• Taxpayer is unable to obtain records
• Death, serious illness, or unavoidable absence
• Fire, casualty, or natural disaster
• Unavoidable absence

Essentially to show reasonable cause, there would need to be a showing of a “good faith” effort to comply and the existence of circumstances beyond taxpayer’s control that prohibited them from complying with the law. “Unable to obtain records” would require the taxpayer to contemporaneously document their efforts to obtain such records (e.g., letters sent to banks requesting documents, etc). A mere statement by the taxpayer of the difficulties in obtaining records would not suffice.

Examples of what does not constitute reasonable cause:

• Ignorance of the law
• Complexity of the tax laws
• Willful neglect
• Mistake
• Reliance on the advice of a CPA
• Forgetfulness

It is possible that a combination of the above factors could be found to constitute reasonable cause, although unlikely.

Establishing non-willfulness, on the other hand, requires a significantly lower standard. Examples of non-willful behavior:

• Ignorance of the law (although not willful blindness)
• Mistake of fact
• Reliance on the advice of a CPA
• Forgetfulness

What should you choose?

From my personal experience in working at the IRS and now dealing with the IRS from the other side of the table, I can state that reasonable cause is a very difficult standard to meet. The important question is the amount of tax loss to the government. Where there is very little or no tax due, DIIRP can be used.

Whether a taxpayer meets this standard is a legal and factual determination that needs to be carefully evaluated with his or her attorney. If you file under DIIRP and the Service does not agree with your reasonable cause statement, you could then be subject to civil penalties which can be significantly more severe than the 5% miscellaneous offshore penalty.


“Delinquent International Information Return Submission Procedures Frequently Asked Questions and Answers.” Internal Revenue Service, 23-Aug-2016,

Congdon v. United States, 2011 U.S. Dist. LEXIS 98024, 108 A.F.T.R.2d (RIA) 6340 (E.D. Tex. 2011). “Though ignorance of the law alone was not sufficient to constitute reasonable cause, plaintiff also alleged other factors such as his inexperience in tax matters, and the complexity of the area of law. Combined, those factors could be found to constitute reasonable cause.” (emphasis added) Court denied the Government’s motion for summary judgment based on its findings. So it appears that while these factors in combination do not preclude a showing of reasonable cause, it does not necessarily follow that the facts in this case are sufficient to establish reasonable cause. The final outcome of this case is not known (i.e., whether reasonable cause was found).

Internal Revenue Manual § 20.1.1-3