There are many moving parts in US tax regulations which are brought together by qualified expat tax consultants. There is nothing what is called do-it-yourself here; the complicacy of international tax preparation may lead to costly mistakes. To reap the full benefits of living and working overseas, you should work along with an experienced expat tax service provider.
You should be aware of the fact that taxes for US expat are determined on the basis of their worldwide income. There are certain tax advantages for Non-U.S. residents. These advantages can be classified into three basic categories: credits for foreign income taxes paid, foreign housing exclusion / deduction, and foreign earned income exclusion.
You must file a US income tax return so you can receive the benefits of foreign earned income exclusion, as it is not automatic. This exclusion is used by self-employed and employees as well, provided they meet the required criteria. As per reports from IRS nearly half of all overseas income falls into this category.
By meeting the physical presence test, many US expats are eligible for foreign earned income exclusion. According to this rule you should be physically present in another country for 12 consecutive months or for 330 days.