Foreign Account Tax Complaint Act (FATCA) will introduce many new tax duties for American taxpayers living abroad. From 2014, not only American taxpayers living overseas, but also foreign financial institutes (FIIs) will be required to report to the IRS. Failure to report will mean heavy penalties.

Forbes reminds Americans living overseas of their new tax duties and warns them against penalties for non-compliance. Although a few will still try to avoid their tax responsibilities after the widespread talk about FATCA and the IRS’ compliance efforts, Forbes gives a quick list of things to avoid with FACTA’s implementations

“Don’t Fail to Report Worldwide Income. You must report worldwide income on your U.S. taxes, including interest, earnings, dividends and more. If you have a foreign account, check “yes” (on Schedule B). You may be entitled to foreign tax credits or an exclusion for income earned abroad. But you still must report it. As part of your tax return (starting in 2011), file Form 8938 where your foreign assets (generally) exceed $50,000 in value.

“Don’t Forget FBARs. You also must file an FBAR annually if the aggregate of your foreign accounts exceeds $10,000 at any time during the year. FBARs have been in the law since 1970, but enforcement is now at an all-time high. Pay attention to these forms. The government sure does.”

In case you did not file taxes in the past and want to get back into compliance, you can use Offshore Voluntary Disclosure Program (OVDP). It reduces the penalties charged for non-compliance and the possibility of imprisonment in cases of tax evasion. Some important things to keep in mind when looking to get back into compliance are discussed by Forbes below:

“Don’t Make Quiet Disclosure Without Care. A “quiet” disclosure means amending tax returns and filing FBARs outside the IRS amnesty program. The IRS says it will treat you harshly if it catches you. But some people are comfortable doing it and it’s better than doing nothing.

“If you don’t owe U.S. taxes (because of foreign tax credits, for example), filing past due FBARs shouldn’t be considered a quiet disclosure. Even if you didn’t report your offshore income or disclose your account, you may be able to recompute your taxes to fit within this rule and avoid penalties. And while both tax returns and FBARs are important, FBARs are arguably even more sensitive than tax returns.

“Civil and criminal penalties for failing to file FBARs are worse than tax penalties. That’s one reason filing FBARs can make a huge difference even if minor errors on your tax returns are not corrected. You can avoid FBAR penalties if you had ‘reasonable cause,’ but the grounds for waiving penalties aren’t terribly clear. Get some advice and be careful.

“Don’t Fail To Address the Past. Some people just start filing accurate tax returns and FBARs prospectively. However, the risks can be high. The IRS may ask about the lack of prior FBARs and tax returns disclosing a foreign account.

“Don’t Merely Close Accounts. If you are considering not trying to clean up past tax returns and FBARs, you may be tempted to close your foreign account. In fact, many foreign banks will do it for you now that FATCA has complicated their compliance. Tying off the problem prospectively may make sense, but can make your lack of compliance even worse if your actions are viewed as efforts to conceal your previous offshore activities. Don’t take any of these steps without professional advice.”

Although it is best to seek professional help in complex tax matters, it is important that you are aware of your tax duties so that you can fulfill them on time and correctly.