[IMGCAP(1)]Several due dates for those with offshore accounts are approaching, with far-reaching consequences for those who don’t comply.

The first, June 30, is for those taxpayers with foreign accounts whose aggregate value exceeds $10,000 any time during the year. They must file a Form 114, Report of Foreign Bank and Financial Accounts (FBAR) electronically through FinCEN’s BSA E-Filing System. The FBAR is not filed with a federal tax return and must be filed by June 30 each year.

Failure to file the FBAR may result in a penalty up to $10,000 if the failure to file is non-willful. If the failure is willful, the penalty is up to the greater of $100,000 or 50 percent of the account balance, in addition to whatever criminal penalties may apply.

The second date is Aug. 3, 2014. That’s the date that FBAR non-filers have to voluntarily come forward and be subject to a 27.5 percent penalty rather than a 50 percent penalty if they have offshore bank accounts with a foreign financial institution which has been publicly identified as being under investigation, or is cooperating with a government investigation. If they do not enter the enter the Offshore Voluntary Disclosure Program by August 3, they may still be eligible for the OVDP, but at the higher penalty.

The first due date has been around since the 1970s, while the August 3 date has just been announced as part of the Service’s modifications to the OVDP.

The current OVDP was launched in 2012, and is the successor to prior voluntary programs offered in 2011 and 2009. Since the launch of the first program, more than 45,000 taxpayers have come into compliance voluntarily, paying about $6.5 billion in taxes, interest and penalties.

IRS commissioner John Koskinen announced two sets of modifications to the program. “First, we’re expanding the streamlined procedures to cover a much broader group of U.S. taxpayers we believe are out there who have failed to disclose their foreign accounts but who aren’t willfully evading their tax obligations,” he said. “To encourage these taxpayers to come forward, we’re expanding the eligibility criteria, eliminating a cap on the amount of tax owed to qualify for the program, and doing away with a questionnaire that applicants were required to submit.”

“Second, we will be reshaping the terms for taxpayers to participate in the OVDP,” Koskinen added. “This is designed to cover those whose failure to comply with reporting requirements is considered willful in nature, and who therefore don’t qualify for the streamlined procedures. These changes will help focus this program on people seeking certainty and relief from criminal prosecution. From now on, people who want to participate in this program will have to provide more information than in the past, submit all account statements at the time they apply for the program, and in some cases pay more in penalties than they would have done had they entered this program earlier.”

“The original streamlined procedure was very narrowly tailored, and not many could meet the requirements,” said James Mastracchio, partner and chair of the tax controversy practice at BakerHostetler. The net result of the modifications will be to short circuit the need to opt out of the program and go to Appeals, he indicated.

The original streamlined procedures were available only to non-resident, non-filers. Taxpayer submissions were subject to different degrees of review based on the amount of the tax due and the taxpayer’s response to a risk questionnaire.

The expanded streamlined procedures are available to a wider population of U.S. taxpayers living outside the country and, for the first time, to certain U.S. taxpayers residing in the United States.

“Many non-filers are really not willful evaders,” said Mastracchio. “However, the IRS wants people to come in, but because of the 27.5 percent penalty people are faced with very severe penalties. In the past, you could come in and if the penalty was too high you could opt out and deal with the agent. When you opted out, you would continue with the exam and try to work out a deal, and if you couldn’t, you would wind up going to Appeals.”

“Now, if you have someone who is non-willful, they simply file under the streamlined procedure, and sign an attestation that they are non-willful,” Mastracchio said. “They just file three years of returns and six of FBARs, and that’s it.”

The changes to the program are good, bad and ugly, according to Seth Entin, a shareholder at Greenberg Traurig, LLC. “The good part is that the IRS has opened the door for much better results—lower or no penalties for U.S. people who were not willfully evading their reporting responsibilities.”

“For some, the bad is the August 3 date,” Entin added. “If they don’t come in by then, and then do a voluntary disclosure for an account with an institution that is publicly identified as being investigated, then the penalty is now 50 percent. Even if they qualify for voluntary disclosure, if the bank itself is under investigation or is cooperating with the IRS, they will be accepted but will pay a 50 percent penalty of the highest balance in the account over the last eight years of noncompliance.”

And the ugly? “If the IRS gets your name first, you don’t qualify for voluntary disclosure and you’re open to criminal prosecution,” he said.

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