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US citizens are taxed on their world wide income regardless of where it is earned. You should file your return using forms available at the IRS website www.irs.gov I will get the link to the forms and instructions and return momentarily.
First, here is the link for the instructions so you can determine which forms you will need.
Yes, you can take the foreign earned income exclusion. You will not be entitled to the foreign tax credit since you did not pay taxes on the income to the other nation.
Many people are unduly afraid of the IRS. While they will investigate the returns of known criminals and suspected terrorists they do not bother regular citizens. While all of us stand the risk of an audit, if you are doing things properly you need not be afraid of the IRS. The only requirement of you is to properly file your returns. The inquiries are made by the IRS themselves if they suspect foul play and there is nothing for you to do except to properly file your returns.