Nothing can ruin the taste of your martini, shaken not stirred of course, than a letter from your foreign bank demanding that you report the account that you hold with them to the U.S. government. For many, this can scare The Living Daylights out of them, especially since this probably has the IRS written all over it. However, the IRS doesn’t have a License to Kill. Yes, they expect you to pay, but you need to understand what you’re up against first, so read on.

Why Your Friendly Foreign Bank Became Dr. No

U.S. residents choose to keep their money in foreign banks for different reasons. However, you can’t deny that sparing your money from taxes is one. So what made your bank all of a sudden turn into the villain and join forces with the much-dreaded IRS? Two words: FATCA Compliance.

The Foreign Account Tax Compliance Act (FATCA), which became law in 2010, focuses on reporting by taxpayers with foreign accounts and by foreign financial institutions with accounts fully or partially belonging to U.S. taxpayers. After becoming effective in July 2014, the IRS started hunting for noncompliance by U.S. taxpayers with offshore accounts. As a result, financial institutions beyond U.S. borders had to comply with the due diligence and annual reporting requirements set. Had they refused, the U.S. government would have enforced a stringent penalty: withholding 30% of U.S. source payments like dividends.

There’s a chance that you, like other taxpayers before you, received your letter before FATCA became effective. This is because foreign banks are trying to identify account holders with a U.S. tax nexus through means like a phone number linked to a U.S. based account. Since yours popped up, you were asked to disclose your account via a Report of Foreign Bank and Financial Accounts (FBAR) form and/or a Form 1040 personal income return or an IRS Offshore Voluntary Disclosure Program. You may have also been asked to fill and submit an IRS Form W-9.

What to Do Now that the Thunderball Came Through the Mail

The World is Not Enough to protect you from the IRS if you intend to ignore the letter. If the IRS discovers your accounts before you disclose them, you will be ineligible from participating in the offshore voluntary disclosure program. As a result, you won’t be eligible for criminal amnesty and what is very likely to be lesser penalties. The metaphor that I like to use here is the hunting of a fox by a thirsty bloodhound. If the bloodhound has already detected the scent of the fox and is hot on his trail, then the fox is “squat.” Indeed, no amount of pleading with the bloodhound is going to save the fox from the sharp and carnivorous teeth of the salivating bloodhound.

As if the risk of prosecution and onerous FBAR penalties wasn’t bad enough, there is also the possibility of a tax audit that will not only consume both your time and money but that is every bit as intrusive as a rectal examination.

Finally, although rare, criminal prosecution carries with it the risk of consecutive sentences if a person is later convicted of one or more willful FBAR violations, regardless of whether they occurred in a single tax year or in multiple tax years. While a single willful FBAR charge carries with it a maximum prison sentence of five years, to the extent that a defendant is convicted of additional willful FBAR violations, the sentences for the additional counts could be made to run consecutively with the original count.

For those unfamiliar with the term “consecutive,” it means that the sentence for a subsequent charge does not begin until after the sentence for the first charge has ended. To say that this would result in a stiff and heavy-handed sentence would be a complete understatement.

Contrast that with “concurrent” sentencing, where a subsequence sentence runs “at the same time” with the first sentence. Thus, a concurrent sentence functions like a “two-for-one” deal at the supermarket where a defendant serves only one sentence for multiple convictions.

With this in mind, you may want to think twice before ignoring a letter from your foreign bank. Finally, if you thought that transferring your funds to another offshore account might help you get the “monkey” off your back, you are sorely mistaken. The IRS will know since FATCA deprives American taxpayers with undeclared foreign accounts from bank secrecy. So unless you want the IRS to Live and Let Die, don’t close your account in hopes of protecting your money.

How to Prevent a Financial Catastrophe of GoldenEye Proportions

If you’d rather financially Die Another Day, contact a tax attorney right away. The fact that you received the letter indicates that it isn’t too late for you yet. Therefore, you still have time to come clean and take part in the 2014 Offshore Voluntary Disclosure Program (OVDP). This program will protect you from major penalties and even jail as long as you enroll before your name reaches the IRS.

You may also be eligible for the streamlined procedures. There are two types: streamlined domestic offshore procedures (for U.S. taxpayers residing in the U.S.) and streamlined foreign offshore procedures (for U.S. taxpayers residing outside of the U.S.). Through the procedures, taxpayers certify that their failure to report their foreign assets was not the result of willful conduct. However, you need to be eligible to apply for the streamlined procedures, so check if you meet the following criteria:

• Taxpayers Must Certify that their Conduct Was Not Willful – Regardless of which streamlined procedure applies, you must certify according to specific instructions that your failure to report all your income and pay taxes was due to non-willful conduct.

• The IRS Initiated a Civil Examination of Returns for a Taxable Year – If the IRS has initiated a civil examination of a taxpayer’s returns for a certain year, they are no longer eligible to use these procedures. The same rule applies if they are under criminal investigation.

• Taxpayers are Eligible to Use Streamlined Procedures if they Filed Delinquent or Amended Returns – If a taxpayer has filed unmentioned foreign income on a tax return or specified a previous-unreported account on a delinquent FBAR (i.e. quiet disclosure), they may still use the streamlined procedures. However, they will still face any penalty assessments made before.

• A Valid Taxpayer Identification Number is Necessary – To be eligible for either of the streamlined procedures, taxpayers should have a valid Taxpayer Identification Number. For citizens, residents and certain people, the TIN is a valid Social Security Number. If you aren’t eligible for a social security number and don’t have an ITIN, you should provide a complete ITIN application with your streamlined procedures submission.

These documents will be reviewed by the IRS, but don’t expect any special treatment, especially if your compliance risk is high. In fact, submissions of this type may not be eligible for the procedures and may bring along tax and interest. In addition, there’s a 5% miscellaneous offshore penalty that applies under the domestic streamlined procedures.

Now most taxpayers opt for a “quiet disclosure” alone. However, there’s a chance that it won’t be in your best interest since you may face a parade of horribles, including ending up with only the shirt on your back after the IRS gets done auditing you and assessing heavy penalties. Therefore, to ensure that Tomorrow Never Dies and that your finances are protected, consult a tax attorney right away so that the IRS will not own your hard earned money and put you through a lot of trouble for years to come.