Working and living abroad can make the tax situation a bit difficult sometimes. An expatriate tax return is not as difficult as it sounds. If you get stuck, enlist the help of an international tax attorney or CPA that has international experience. There are a whole set of laws just for Americans working and living outside the US. Those waters can be difficult to navigate at times, but with proper help and knowledge you can get your taxes done with little problem. Expatriates can benefit from some great exclusions and credits that everyone back home doesn’t have access to.
Whether you work abroad for a US company or work for a foreign company, you will definitely be paying US taxes as a citizen of the US. You may also be subject to foreign taxes. The US has made provisions for this with the Foreign Earned Income Exclusion. They also have a foreign tax credit so you can deduct from US taxes any taxes you pay to that country. The US has treaties with many countries about how taxes will be handled for US citizens living in that country. Expatriate tax return is subject to these laws and codes, but most of the time they will help you to avoid paying redundant taxes, expatriate tax return.
Employees of US companies who are working offshore have a less complicated expatriate tax return. The system continues to work in much the same way as it does onshore. But for employees of foreign companies, it gets a bit sticky. US Social Security and Medicare will not be collected by your company in this case. You may be subject to other withholding for foreign social programs. Some US companies abroad have made provision with the US government to forgo social withholding altogether in order to participate in the foreign country’s social programs instead. There are only a few dozen companies that have made special arrangements for this.
The self-employed who work abroad are subject to a bunch more paperwork than anybody else. They must report their income from inside the US and outside the US and pay taxes and social withholding for themselves and for their enterprise. Though taxes can be more complicated when an international element comes into play, it is important to stay on top of it so that you don’t have to end up paying hefty fines for non-payment, non-filed expatriate tax return.