If you have offshore financial activity, the Internal Revenue Service (IRS) asks that you come forward with voluntary disclosure of this information. Taxes are required to be paid on the activity and coming to the IRS voluntarily eases much of the pain on both sides to get the taxes paid and the matter closed. This is done through the Offshore Voluntary Disclosure Program that the IRS offers each year. Yet, many choose to not participate with dire consequences once the IRS begins to examine them. Detailed Examination
Whether you participate in the Offshore Voluntary Disclosure Program or not, you will have your offshore financial activity looked at. The difference is how the IRS approaches it. It can be extremely in depth when you try to avoid letting the IRS know of your financial activity. Stepping forward and filling out all the paperwork for the voluntary disclosure program gives the appearance of not hiding something or avoiding the IRS. You initiate the disclosure and the examination is much easier. The IRS does not start the process with the mindset that you are avoiding taxes. They see you as working with them. This makes working with the IRS much easier as they like voluntary disclosure.

If you avoid the IRS voluntary disclosure and don’t take advantage of this opportunity that they are giving you, then you give the appearance of hiding from the IRS. This causes you to fall under their microscope which has a very high magnification. If they think you are hiding things, they will dig deeper and question transactions more closely. Basically, you will be audited and it will not be an easy one. The IRS will expect you to have all your paperwork together and be prepared to answer all questions. It would have been much better to go through the Offshore Voluntary Disclosure Program and much less painful. Extremely High Penalties
Yes, you will have to pay the IRS even if you go through the voluntary disclosure program. Benjamin Franklin assured us that taxes can’t be avoided just as death can’t be. They have to be paid, but what you have to pay if you don’t come forward on your own will amaze you if not make you sick to your stomach. » Read more: Results of Avoiding the Offshore Voluntary Disclosure Program