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A US Citizen is taxed on their worldwide income. In your case only your earned income is subjected tot he exclusion amount for income of US citizens that live abroad. Your pension is not subject to the exclusion from US taxation.
What is available to you though would be the Foreign Tax Credit. If you are taxed on income, wages or pension, in Spain then you are allowed to take a credit on your US tax return.
You are required to file every year as a US citizen but you are also allowed to use any and all credits and exclusions that are available to you. The 2/3 of income that you stated the IRS will want for taxes is most probably not correct. If a tax payer does not file a return, the IRS will prepare a substitute return for them. When this happens the IRS will not calculate all possible credits and deductions that the taxpayer is allowed.
I suggest you complete your returns and show the IRS that you are not really owing as much as they are attributing to you based on the Foreign Income Exclusion (Form 2555) and the Foreign Tax Credit (Form 1116).
Be cautioned though, you are not allowed to use the 2 forms mentioned and have the same income on each. In other words, if you use the forms 2555 and 1116, the wages are only on the 2555 and the pension taxed on the 1116.
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