I spent a year working as an expat with 99% of my income from offshore. The offshore taxes by the country I was residing in were themselves greater than what I would be burdened with with the same income in the USA. However, at face value, the USA taxes layered on top of the offshore tax liability actually exceeded the total gross income. So, I'm supposed to work at a loss?
Some assumptions on what is applicable taxable income or not and deductible items eligible or not got me to a plausible and defensible position on taxes so I could have a few $$$ for myself out of the deal. USA tax law sucks and the expat extension of this is worse. Bottom line on this is that expat taxable issues are a setup for the IRS to play hell with a person if they decide it would be fun.
Your story sounds unusual. I was in a similar situation, and the taxes I paid in the foreign country were credited against my U.S. tax liability. I still had to file a U.S. tax return, but I owed $0 because the amount of taxes I paid in the foreign country exceeded what I owed in the U.S.