What if you’re being paid by the foreign government while living in their country; or does it mean if you’re being paid by an American company and working overseas for them you pay taxes to the US? It could also be a double whammy where you pay taxes to both countries.
There is no “could” about it. It is a double whammy. The current exemption is something like $120,000 a year. Over that point you owe US taxes even if you pay taxes where you live. This does not take the local cost of living where you live into consideration. $100,000 a year in Hong Kong is nearly poverty level in the US.
BTW the most common occupations of expatriate Americans is are school teachers and missionaries, neither of those are particularly high paying occupations.
The US tax laws in this area re simply criminal. I would almost vote for PIAPS if she promised to end this practice. Almost, not quite