Bulgaria is the most recent country to ink a deal with the United States to implement FATCA, the Foreign Account Tax Compliance Act. Passed by Congress in 2010, the law is designed to stomp out offshore tax evasion, by targeting U.S. taxpayers with unreported offshore accounts.

Under the law, foreign banks and financial institutions must report accounts belonging to U.S. taxpayers to their local taxing authority. The local taxing authority, in turn, must turn this information over to the U.S. upon receipt of a “group request.” However, before this information can be exchanged, the local taxing authority must obtain the consent of those U.S. accountholders who are affected. This is usually accomplished through what’s called a “declaration of consent.” This is the essence of a Model 2 Treaty between the U.S. and a member country.

Bulgaria’s cabinet signed the agreement on February 4, 2015. In order for it to become effective, the National Assembly must still ratify the agreement. Although numerous banks have lodged complaints about the cost of compliance, very little “push back” is expected.

What happens in the unlikely event that the National Assembly fails to ratify the FATCA agreement? Bulgarian financial institutions would become subject to a 30% withholding tax which is as popular in the banking community as a trip to the dentist is to get a tooth pulled.

According to The Sofia Globe, Bulgaria’s state media office championed the benefits of FATCA beginning with how it will improve relations between the two countries while enhancing transparency when it comes to international banking: “[it will] improve administrative co-operation between the tax administrations of Bulgaria and the US and will significantly contribute to international banking and tax transparency.” Government officials also called it a powerful tool to fight tax evasion.

In light of this recent development, U.S. taxpayers with unreported accounts in Bulgaria are in for a rude awakening. If they don’t come forward now, they risk having their account information turned over to the IRS by their Bulgarian bank, and this would render them ineligible for the IRS’s voluntary disclosure program. U.S. taxpayers with one or more foreign bank accounts that exceed an aggregate balance of $10,000 (USD) in a single tax year must report those accounts on a Foreign Bank Account Report (FBAR), no matter how insignificant the interest generated was or how small the accompanying U.S. tax liability was.

Failure to report a foreign account subjects the taxpayer to onerous civil penalties, which could run as high as $ 10,000 (USD) if the violation is deemed non-willful. As harsh as this might sound, it only gets worse if the violation is deemed willful. For example, the ceiling for a willful FBAR violation is the greater of (1) $100,000 (USD) or (2) 50% of the closing balance of the account.

And this is per account, not per year. In other words, to the extent that the taxpayer has multiple unreported foreign accounts in the same tax year, an FBAR penalty could be asserted for each separate account. By stacking FBAR penalties one on top of the other, an individual’s FBAR penalties could shoot up into the stratosphere.

Voluntary disclosure programs are available, but they disappear faster than the last grain of sand to pass through an hourglass if the IRS receives your account information from a Bulgarian bank before you come forward. The expression that I like to use here is that if the bloodhound is already hot on the trail of the fox, then it’s too late: the fox is “squat.” The lesson to be learned here is that it’s better to come forward now, while you still have a fighting chance at qualifying for one of the IRS’s voluntary disclosure programs, than to sit back on the sidelines and do nothing. As John F. Kennedy once said, “it’s better to light a candle than curse the darkness.”