More than 80,000 Defense Department employees and contractors with security clearance owe back taxes, a June 28 Government Accountability Office report says. GAO found that about 83,000 DoD employees and contractors who held or were determined eligible for secret, top secret, or sensitive compartmented information clearances had unpaid federal tax debt totaling more than $730 million as of June 30, 2012, the report says.

DoD reported to GAO that about 3.2 million civilian and military employees and contractors held or were approved for clearances from Jan. 1, 2006, to Dec. 31, 2011, the timeframe GAO used for the review. More than 5.1 million federal employees--both civilian and military--and contractors held a security clearance as of October 2013, GAO says.

As the Justice Department winds down its eight-year crusade against Swiss banks selling offshore tax-dodging services to wealthy Americans, the Internal Revenue Service is offering its own parting gift: softer penalties for taxpayers who come out of the woodwork to disclose their secret accounts. Call it the advent of the “I was clueless” defense.

The IRS announced last week it would ease the financial and legal pain for the estimated 6 million expatriate Americans who live and work abroad, many of whom don’t know that they must pay U.S. taxes on their foreign income. People who come forward under an amnesty program to disclose their foreign accounts and settle their U.S. tax bills won’t be charged any penalties and will simply owe back taxes and interest. Previously, they would have owed a penalty of 27.5 percent, computed as a percentage of each undisclosed foreign account.

As a U.S. citizen/green card holder residing abroad, you still owe U.S. taxes on your worldwide income.  The U.S. has tax treaties with many countries, which allows the federal government to exchange data on its citizens living in other countries for tax purposes. Most importantly, if you do not file a tax return for a given tax year, the statute of limitations on that year never runs out.

If you are a U.S. citizen or a resident alien of the United States and you live or work abroad, you are taxed on your worldwide income. However, you may qualify to exclude from income up to an amount of your foreign earnings that is now adjusted for inflation $91,400 for 2009, $91,500 for 2010, $92,900 for 2011, $95,100 for 2012 and $97,600 for tax year 2013.

The Defense Base Act (DBA) is an extension of the Longshore and Harbor Workers' Compensation Act (LHWCA) which provides disability compensation and medical benefits to employees and death benefits to eligible survivors of employees of U.S. government contractors who perform work overseas. With a few exceptions, the DBA incorporates the provisions of the LHWCA.

• Work for private employers on U.S. military bases or on any lands used by the U.S. for military purposes outside of the United States, including those in U.S. Territories and possessions;
• Work on public work contracts with any U.S. government agency, including construction and service contracts in connection with national defense or with war activities outside the United States;

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Department Mission Statement -Advance freedom for the benefit of the American people and the international community by helping to build and sustain a more democratic, secure, and prosperous world composed of well-governed states that respond to the needs of their people, reduce widespread poverty, and act responsibly within the international systems.