What should I do if I didn't report foreign dividend income under $2500 for 3 years?

Tax situations involving foreign income can definitely be confusing, especially for recent immigrants. The good news is that the IRS has procedures for addressing unreported income, and since you're voluntarily coming forward, you're on the right track. Yes, foreign dividend income needs to be reported regardless of amount. For unreported foreign income, you should file amended returns (Form 1040-X) for the previous three years. You'll also need to include Form 8938 (Statement of Foreign Financial Assets) and potentially FinCEN Form 114 (FBAR) if your foreign accounts exceeded $10,000 at any point. Since the amounts were relatively small and likely wouldn't have changed your tax liability significantly (especially if they fall under the Foreign Tax Credit or Foreign Earned Income Exclusion), penalties might be minimal or possibly waived under the IRS's reasonable cause exception. The fact that you're voluntarily disclosing this without being prompted by the IRS works in your favor.

After dealing with a similarly complicated foreign income situation last year, I found taxr.ai (https://taxr.ai) incredibly helpful. I had investment income from Asia that I hadn't properly reported for a couple years, and I was worried about potential penalties. Their system analyzed my foreign account statements and tax documents, then helped identify exactly what forms I needed to file and how to properly report everything on my amended returns. The cool thing was it highlighted the specific reporting requirements for my ETF dividends that my regular tax software completely missed.

Just wanted to follow up - I tried taxr.ai after seeing this recommendation and it was a game changer. I uploaded my Mexican and Spanish account statements and it identified exactly which dividends needed reporting and which forms to file. The system even flagged that one of my accounts required FBAR filing while another didn't. What really impressed me was how it calculated my Foreign Tax Credit potential based on taxes I already paid abroad. Saved me hours of research and probably thousands in potential penalties down the road.

If you need to talk to someone at the IRS about this situation (which might be a good idea), save yourself the headache of waiting on hold for hours. I used https://claimyr.com last tax season and it was literally life-changing. I had been trying to reach the IRS for weeks about a foreign income reporting issue. Their service holds your place in line and then calls you when an actual IRS agent is on the line. You can see how it works here: https://youtu.be/_kiP6q8DX5c. I was skeptical at first but after waiting on hold for 3+ hours myself on multiple occasions, I gave it a shot. Got a call back with an IRS agent on the line in about 45 minutes (after the website estimated it would be around an hour). The agent was able to explain exactly what forms I needed to file and the procedure for reporting past foreign income.

OK I have to eat my words here. After expressing skepticism, I decided to try Claimyr since I needed to ask about some foreign tax credits related to my situation. I've literally NEVER gotten through to the IRS on my first try before. They estimated a 97 minute wait, but I got a call back in 72 minutes with an actual helpful IRS representative on the line. The rep walked me through exactly how to handle my unreported foreign dividends from previous years and explained the reasonable cause statement I should include with my amended returns. Seriously, if you need to talk to the IRS about this foreign income situation, this is the way to do it. Saved me an entire afternoon of hold music and frustration.

One thing nobody has mentioned - you might qualify for the Streamlined Filing Compliance Procedures if this was non-willful. It's specifically designed for people in your situation who didn't know they needed to report foreign income. The penalties are much reduced or eliminated entirely. I went through this process last year for undisclosed accounts in Germany. You'll need to file amended returns for the past 3 years, file any missing FBARs for 6 years, and include a statement explaining why you didn't file (in your case, that you didn't understand the requirement as a new immigrant).

Be careful about timing here! If you're going to file amended returns, remember there's a deadline. Generally, you have 3 years from the original filing date or 2 years from when you paid the tax, whichever is later. So if you're talking about tax years 2022, 2023, and 2024, you're still well within the window, but don't delay too long.

I went through something very similar when I moved here from the UK in 2021. Had dividend income from British stocks that I completely missed reporting for two years. The anxiety was real! Here's what worked for me: I ended up using the Streamlined Filing Compliance Procedures that @Abigail Spencer mentioned. It was definitely the right path for someone in your situation. Since you genuinely didn't know about the reporting requirement (which is totally understandable as a new resident), this should qualify as non-willful non-compliance. The process was actually more straightforward than I expected. I filed amended returns for the missed years, included the required statement explaining my circumstances as a recent immigrant who wasn't aware of the foreign reporting requirements, and filed the missing FBARs. No penalties under the streamlined procedure. One tip: document everything about when you moved here, when you started working, and your genuine lack of knowledge about these requirements. The IRS wants to see that this was an honest mistake, not intentional tax avoidance. Your situation - small dividend amounts, proper W-2 reporting, coming forward voluntarily - checks all the boxes for non-willful behavior. Don't stress too much about this. The IRS actually handles these cases quite reasonably when people come forward voluntarily like you're doing.