U.S. Expat Tax Services for Americans Living in Hong Kong.
American expats and Green Card holders living or working in Hong Kong have essentially the same IRS filing requirements that apply to those living back in the U.S. Getting paid in a foreign country and working for a foreign employer; We are all taxed on our worldwide income. You may also have a tax filing requirement in your former state of residence.
That said, U.S. individuals working in Hong Kong are entitled to certain tax benefits. You may be able to exclude up to $100,800 of foreign earned income (this amount increased every year with inflation and does not depend on your country of residence). Foreign housing costs are given special treatment and you may get credit for foreign taxes paid. However, you must file a U.S. tax return in order to get these benefits. The IRS has the rest of your life to track you down for any year that you were obligated to file, but did not file a U.S. income tax return. Expatriates who do not file U.S. tax returns not only jeopardize the loss of these tax benefits but risk great trouble when returning to the U.S. When an expatriate’s foreign assignment ends, it will be extremely difficult to re-enter the U.S. tax system with an unexplained absence.
The rules governing the special tax benefits available to expatriates are complex. Also there are very substantial and escalating penalties that the IRS may assess for failure to file forms required of expatriates having unreported foreign bank or security accounts, owning a foreign corporation or being a beneficiary of an offshore partnership or trust. So just because you left the U.S., you did not leave the IRS behind!