Question: I am an American, self-employed, selling expensive cosmetics on the Internet. I moved to Berlin in late 2012. My 2013 gross income will be between $60,000 and $80,000. My PayPal address and bank accounts are in the U.S. How should I file my taxes for 2013?
Answer: U.S. citizens and resident aliens are taxed on their worldwide income, even if they live abroad. If the income you earn while living in another country can be considered “foreign income” for tax purposes, you may be eligible for what the IRS calls the “foreign earned income exclusion.” That provision is aimed at preventing individuals from having to pay taxes in more than one country. It allows up to $97,600 worth of foreign earnings to be excluded from the income you report on your U.S. tax return for 2013.