US citizens and permanent residents working outside the United States generally are still required to file annual US tax returns, and the IRS is constantly updating its technology to better locate those non-filing taxpayers and bring them into compliance. However, in addition to increasing its enforcement capabilities, the IRS has also taken steps to encourage non-filers to come into compliance by waiving penalties for those taxpayers eligible to take advantage of the streamlined offshore compliance procedures.
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If you have employees working outside the United States who are US citizens or permanent residents (i.e., a green card holder), these individuals will need to continue filing US tax returns to declare all of the income they earn in both the United States and their Host country. This requirement does not change if they are employed or paid from a non-US employer. Additionally, most of the tax rules that apply to taxpayers living in the United States will also apply to US persons operating overseas. The result may be that an overseas employee will be subject to tax in both the US and other jurisdictions.
