If you are a U.S. citizen or a Green Card Holder of the United States and live in Iran, you are taxed on your worldwide Income regardless where you earned it.
In addition, you are subject to all the US international tax laws including Foreign Bank Account Report (FBAR), http://www.zflegal.com/services/report-of-foreign-bank-and-financial-accounts-fbar., Foreign Account Tax Compliance Act (FATCA), see http://www.zflegal.com/services/foreign-account-tax-compliance-act-fatca and other applicable tax laws.
The good news is that you may exclude up to an amount of your compensation earned in Iran which is adjusted annually for inflation ($91,500 for 2010, $92,900 for 2011, $95,100 for 2012, $97,600 for 2013, $99,200 for 2014 and $100,800 for 2015), if you qualify. For example not live in the US more than 35 days in a calendar year.
This is according to the Foreign Earned Exclusion provided under the Section 911 of the Internal Revenue Code. You may deduct certain foreign housing amounts. This exclusion can only be taken by filing the tax return. It is important to note that this exclusion doesn’t apply to un-earned income (see below).
Neither does it waive the requirements for filing the FBAR and FATCA (see above). Generally, the foreign income may be classified to three categories; Earned Income, Un-earned Income and Variable Income. Earned income includes salaries & wages, commissions, bonuses, professional fees, tips, etc.
Unearned income includes dividends, interest, capital gains, gambling winnings, alimony, social security benefits, and annuities.
Variable income may fall into either one of these categories under the circumstances and includes business income, royalties and rents.
The bad news is that your employment in Iran may violate the US laws of sanctions against Iran.
There are certain exceptions to this law? For instance, employment at the World Bank, International Monetary Fund (IMF) or other United Nations related entities.
It is advisable to ask your potential employer to ensure that your employment in Iran is otherwise authorized by OFAC. In addition, your self-employment income in Iran even if were authorized by OFAC is excluded only for income tax purposes and not for Social Security or Medicare purposes.
Also, you may not take a foreign tax credit for taxes paid in Iran, due to the economic sanctions against Iran.
OFAC violations: In case you have worked in Iran, and reading this article raises your curiosity as to whether you may have violated any US laws, you may seek an in person legal advice from our firm.