Have a Tax Question? Ask a Tax Expert
This is income from foreign sources. As you noticed US citizens are required to report all income worldwide...
As you are in the US - you may not claim foreign earned income exclusion, however - you may claim a credit for taxes paid for taxes paid in foreign country - so the same income would not be taxed twice.
Use the form 1116 - http://www.irs.gov/pub/irs-pdf/f1116.pdf please find instructions here - http://www.irs.gov/pub/irs-pdf/f1116.pdf
Currently - there is no tax treaty between Taiwan and US...
US consideres China and Taiwan as separate countries.
(a) the term "the People's Republic of China", when used in a geographical sense, means all the
territory of the People's Republic of China, including its territorial sea, in which the laws relating to
Chinese tax are in force, and all the area beyond its territorial sea, including the sea-bed and subsoil thereof, over which the People's Republic of China has jurisdiction in accordance with international law and in which the laws relating to Chinese tax are in force;
source - http://www.irs.gov/pub/irs-trty/china.pdf
Let me know if you need any clarification.