On Wednesday, June 18, 2014, the IRS announced that it was trying to make it easier for taxpayers to come clean about offshore accounts. The Service made changes to two key programs – one intended for taxpayers that willfully sought to evade tax laws, and another for those that avoided taxes despite trying to comply with the law.

John Koskinen, the IRS commissioner, said in a statement that the changes would convince more taxpayers to get up-to-date on their taxes.

“The new versions of our offshore programs reflect a carefully balance approach to ensure everyone pays their fair share of taxes owed.”

“Through the changes we are announcing today, we provide additional flexibility in key respects while maintaining the central components of our voluntary programs.”

These changes amount to the IRS’s latest effort to promote tax compliance and to crack down on offshore tax evasion, which has been an agency priority for years. The new rules also come just two weeks before the Foreign Account Tax Compliance Act (FATCA) goes into effect. FATCA mandates that foreign banks tell the IRS about accounts held by U.S. taxpayers. Every day, new countries and banks are signing on to the FATCA, and the IRS is aggressively pursuing tax evaders that it discovers as a result of the information disclosed by these participating banks.

Let’s examine these changes in more detail. The first rule expands the original streamlined procedures to a wider population of U.S. taxpayers. For those unfamiliar with the streamlined procedures, they relax the penalties that a taxpayer with an overseas account can face if the account was not properly disclosed.

While at one time only available to nonresidents, these procedures are now available to U.S. taxpayers who live abroad and within the United States. In so doing, the IRS extended an olive branch to Americans living in the U.S. as well, effectively saying that the “I didn’t know” argument would now be available to U.S. taxpayers with undisclosed offshore accounts who live in the United States. However, as with all programs overseen by the IRS, there is a caveat. And that is that the failure to disclose must have been unintentional.

This new rule also makes it easier for taxpayers to take part in the program, by eliminating a required questionnaire and making those with more than $ 1,500 in unpaid taxes per year eligible.

If you satisfy these conditions, then right about now you’re probably on the edge of your seat eager to know what the offshore penalty within the streamlined procedures is. So here it is. For taxpayers living in the U.S., the penalty is 5 percent of the assets in the foreign account. Yes, you heard right – just five percent. And for taxpayers living outside of the U.S., it gets even better. To the extent that expats successfully complete the procedures, all penalties will be waived!

Taxpayers should take note of the following. Due to the expansion of the Streamlined Filing Compliance Procedures, the IRS has eliminated the reduced penalty structure in the 2014 OVDP that previously existed within the 2012 OVDP (i.e., 12.5% for taxpayers who had foreign accounts with maximum aggregate values of less than $ 75,000). In other words, the 12.5% penalty will no longer be available.

Those taxpayers who willfully tried to evade taxes and are now seeking shelter in the IRS’s offshore voluntary disclosure bunker were not as fortunate. Not only must taxpayers trying to enter the new program submit more information, but they could face stiffer penalties. For example, those whose failure to report a foreign account is deemed willful and who use a financial institution that is being investigated by the IRS or the Justice Department could face a whopping 50% penalty on their offshore holdings. This penalty is up from the former “one size fits all” penalty of 27.5% on aggregate offshore account balances greater than $ 75,000.

What does this mean for you? If the IRS finds that you willfully failed to disclose your offshore financial account(s) by failing to file a FBAR, you could face a 50% offshore penalty on the highest aggregate balance of your undisclosed foreign account – during the look-back period – under the new 2014 OVDP program.

Michael DeBlis III, a tax attorney specializing in OVDP, recommends that holders of undisclosed foreign accounts with unreported income apply to the OVDP immediately. Why? Time is running out. The deadlines for two potentially apocalyptic events are right around the corner – the first being July 1, 2014 and the second being August 4, 2014.

On July 1, 2014, FATCA will go into effect. And on August 4, 2014, the onerous 50% offshore penalty kicks in. Beginning August 4, you will be subject to the 50% penalty if:

1. Your foreign financial institution has become a target of investigation by the IRS or the Department of Justice; or
2. Your foreign financial institution is cooperating with the IRS or the Department of Justice to help them locate tax evaders; or
3. Your foreign financial institution has been identified in a court-approved summons seeking information about U.S. taxpayers who may hold financial accounts at that institution.

Unfortunately, this doomsday scenario only gets worse. Once the 50% offshore penalty applies to even just one of your accounts or assets, it extends to all of your assets, including accounts held at another institution or established through another facilitator even if there have been no events constituting public disclosures of (1) or (2) above. It’s the equivalent of getting sprayed by a skunk and having that putrid odor penetrate every pore of your body.

All that procrastination will succeed in doing is lead to penalties almost double the current penalties. Fortunately, there is still a small window of time before the penalty increases. Don’t let it pass you by. While you may still be eligible for OVDP after August 4, 2014, you will be adding a layer of risk that you could surely do without – the possibility of being assessed the 800-pound gorilla offshore penalty, which could strip you of everything including the shirt off your back.

The IRS has published a list of banks and promoters whose clients may no longer be eligible for OVDP. As of June 18, 2014, that list includes:

1. UBS AG
2. Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd.
3. Wegelin & Co.
4. Liechtensteinische Landesbank AG
5. Zurcher Kantonalbank
6. Swisspartners Investment Network AG, Swisspartners Wealth Management AG, Swisspartners Insurance Company SPC Ltd., and Swisspartners Versicherung AG
7. CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates
8. Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd.
9. The Hong Kong and Shanghai Banking Corporation Limited in India (HSBC India)
10. The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield), its predecessors, subsidiaries, and affiliates

Every day, the above list continues to grow. It seems that U.S. taxpayers are racing against two clocks, both literally and figuratively. First, U.S. taxpayers must make a “noisy disclosure” of their offshore assets before their financial institution dimes them in. And second, U.S. taxpayers who willfully sought to evade taxes should disclose before they become subject to increased penalties.

In a time where federal tax law and penalties are changing at warp speed, anyone concerned about offshore disclosure should consult a professional immediately. Whether you’ve already been visited by a Special Agent from Criminal Investigation, or recent news has you worried about your hard-earned assets, Michael DeBlis is here to help. There is no doubt that the tradeoff of having an experienced professional on your side for a sound night’s sleep makes all the sense in the world.