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I am a U.S. citizen and have been living overseas for already couple years and easily can pass the IRS physical presence test. However, what is not clear to me is that nevertheless I worked out of my apartment in a foreign country online, I did generate income mostly from US-based customers, which would report me (in fact a single person LLC company) as a US-entity in their filings. Do I have to pay taxes as usual in full or the fact I've been living in another country somehow mitigates my tax-burden?

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    Are you a U.S. citizen? It seems implied but you didn't explicitly say so.
    – Chris W. Rea
    Feb 25, 2019 at 17:04
  • Yes, I am a US citizen.
    – Nick
    Feb 25, 2019 at 17:54
  • I assume that you still have to pay taxes to the IRS, but you your country of residence might have a treaty with the US to where you will pay less taxes there. You haven't mentioned which country that is, though.
    – xyious
    Feb 25, 2019 at 18:09

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US Citizens need to file taxes on all worldwide income, regardless of their residence. They may be able to obtain reduction on their net US taxes actually owed through effectively one of two methods:

(1) Calculation of their 'foreign tax credit' [essentially foreign taxes paid on the same income stream]; or

(2) the Foreign Earned Income Exclusion, which allows for ~90k of employment income earned outside the US by a non-US resident to not be included in your general income for US tax purposes.

However, for #1 above to apply, it will typically need to be income earned outside the US [if it is income earned in the US, the US will have the right to tax it first, and the other country may allow you to claim your US taxes as a foreign tax credit itself].

In either case, you still need to file the full tax return.

The LLC complicates things somewhat and I'm unable to comment on that point.

If you are uncomfortable spending 20+ hours on your taxes this year (making sure you research things directly from IRS sources and maintain a good file of records for future audit purposes), hire a good accountant. Good, in this case, unfortunately means expensive. I would expect at least $500+ to get someone who knows what they're doing. Might be more like $2,500+.

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  • But if you are self-employed, still need to pay Medicare and Social Security tax
    – Philip
    Feb 7, 2020 at 7:57
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    @philip Agreed - and whether those taxes are ultimately owing, or will be offset by FTC's, will depend on the foreign country in question, and the tax treaty applicable there.
    – Grade 'Eh' Bacon
    Feb 7, 2020 at 13:57

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