Taxation for U.S Citizens and Resident Aliens Living Abroad
In general terms:
All U.S. citizens, regardless of where they live, are taxed on their worldwide income.
All U.S. citizens need to follow the laws of the country they are in.
For countries the U.S. has tax treaties with the U.S. citizens when they file their U.S. tax return are granted an exemption on their income based up the tax treaty with that country.
You must express the amounts you report on your U.S. tax return in U.S. dollars.
If you receive all or part of your income or pay some or all of your expenses in foreign currency, you must translate the foreign currency into U.S. dollars.
The foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction are based on foreign earned income. For this purpose, foreign earned income is income you receive for services you perform in a foreign country during a period your tax home is in a foreign country and during which you meet either the bona fide residence test or the physical presence test.
For more information see Publication 54), Tax Guide for U.S. Citizens and Resident Aliens Abroad. Be sure you spend time with IRS rules and regulations before you earn the income and that of the country where you are working and the limits/rules on travel requirements/ lengths of stays and the bona fide residence test.
For more information please see the IRS web site at http://www.irs.gov/businesses/small/international/article/0,,id=97324,00.html/
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