U.S. persons or residents are, as a general rule, taxed on their worldwide income. Generally all income earned abroad is directly subject to U.S. taxation in addition to a taxpayer's domestic income. To prevent double taxation (once by the foreign jurisdiction and once by the US), special tax treatment may apply to U.S. citizens and resident aliens working abroad called expatriates. Foreign income earned by U.S. based flow through entities such as partnerships, S corporations, certain limited liability companies and trusts is generally nontaxable at the entity level just as domestic income is, however the flow through income is taxable at the individual or beneficial owner level on an annual basis. Foreign income of domestic C corporations generally does not usually become taxable to its U.S. shareholders until paid out as dividends, however, foreign income in generally subject to immediate U.S. taxation to domestic C corporations at the entity level.
