Staying overseas, I also got my account locked last month when I invoiced a consulting client. Seemingly out of nowhere because the previous 22 invoices cleared without an issue. But I am properly set up for this. We initiated a refund, and then I invoiced them through another EU business I set up just for this type of scenario. Then I issued a B2B invoice to my business in Europe, from my LLC in Asia; which then paid it out to me as a salary. Fees are steep, but tax is low; so that balances out.
If you're still an American citizen, don't you technically still owe US to taxes on that "salary"? And since you're paying it as salary, I'm not sure that you're able to deduct any of the fees as expenses from what's owed.
The foreign tax credit is provided to prevent the double tax burden when your foreign source income is taxed by both the United States and the foreign country.
You just submit that you already paid taxes on that income to a foreign government and then no additional US taxes (to a limit, I beleive).
It's not that simple. There are a lot more details, but at a minimum you will still need to pay US taxes to the extent that the foreign government taxes at a lower rate. You'll also often still need to pay state income taxes.
The answer depends on how your specific state defines tax residency (for example California is notoriously difficult to escape).
Generally the rules will be something like you remain a tax resident of your old state, regardless of how long you stay abroad, until you establish a new permanent tax residency (whether in a new state or country).
What I eventually did is return to the US, sign a 1 month lease in Florida so I could get a drivers license and register to vote, and then return abroad. According to my tax accountant, that was enough.
Americans abroad shouldn't pay taxes (since they get basically no benefits) or vote (why should those who live abroad affect the laws they are, largely, not subject to?)
Americans abroad get a very valuable guarantee though. If shit hits the fan the full force of the US Military and Government is around to help out. They also are a last resort for Americans in emergencies abroad. Emergency assistance, flights and travel back home, etc.
It's not like we give up everything but leaving the country.
And your citizenship allows you to get visas/dual citizenships that you wouldn't have access to if you weren't an American citizen. An American passport is pretty valuable, even if you don't live in America.
This is all less relevant if you move to, say, the EU, but it's still worth noting.
It's not much of a guarantee when it depends on the administration in charge. Recent debacles come to mind first, but the willingness of the government to help (in particular, with your mention of the military) is extremely variable.
