I am an American citizen who wants to reside and work in Europe. 
Coincidentally, my American employer is looking to hire someone with
my credentials to work across Europe. They claim, however, that it
costs a lot to have an expatriate work for them and are not willing to
go that route as of this time.

Since my parents were born in Poland and have Polish passports, my
boss gave me the impression that I would increase my chances working
in Europe if I formally obtained Polish citizenship and resided there.
 I am not interested in giving up my American citizenship.

I would perform consulting work for a private American company and
would travel across Europe approximately 70-80% of the time.  We
currently indirectly employ several European citizens through a
European staffing agency until we get our own European headquarters.

Does an American company owe a significant amount of taxes/fees associated
with employing an expatriate?

Will formally obtaining a Polish citizenship and residing there have
any impact on how I can be employed?  Or, as an American citizen, am I
only allowed to be an expatriate since the U.S. does not recognize
dual citizenship?

If I am a Polish and American citizen living in Poland, how will I be
taxed (being an expatriate or otherwise)?

Thank You.

Hi greatanswer,

Just wanted to let you know that it is not true that the U.S. does not
recognize dual citizenship.

"...a person who is automatically granted another citizenship does not
risk losing U.S. citizenship."
"In order to lose U.S. citizenship, the law requires that the person
must apply for the foreign citizenship voluntarily, by free choice,
and with the intention to give up U.S. citizenship."
http://travel.state.gov/travel/cis_pa_tw/cis/cis_1753.html

In other words, by default you keep your US citizenship unless you renounce it.

Regards,
hummer

Have you checked that your employer isn't willing to consider
employing you on local terms?  (ie local to whatever European country
you're working out of).  Normally, expats are expensive because they
get loads of extra benefits like travel home, rent allowances, tax
equalisation, costs of shipping belongings, etc etc plus possibly a
guaranteed job back home after a defined period.  However, if you
especially want to live in Europe, you might be able to forego all
this and just get the package that a national of whichever country
would get so it would be no more expensive for your employer. 
Presumably they would still have to assist you to get a work permit
but that isn't generally speaking expensive.  What I'm saying is that
expats are expensive to them because of their own
employment/remuneration policies, not (probably) because of anything
charged to them by any outside body.

Greatanswer,
I agree with Jago8-ga. Since an American expatriot would be subject to
taxation in both countries (under double taxation agreements, the tax
is netted, effectively paying the higher rate), if the US employer
compensates for this, in some countries this may be considered part of
the employee's income, escalating the whole package.  This is the case
in Germany, which taxes worldwide income (like the USA).  In England 
- I believe (!) -  he would only be taxed on payments made to him
within the UK, which also seems to be the case in Poland.
If so, this suggests that it would be better NOT to become a Polish citizen. 
Here is one site that outlines the situation in Poland:
http://www.youradwokat.com/business/business_mattersc.html

Compensation of expats is something major accounting firms know about.

Employment compensation in Poland is still significantly lower than in
the older  member nations of European Union, which suggests that an
American would not be satisfied with such compensation unless it were
supplemented in some way.  And one probably would want assurance that
one could return to work for the company in the States.
Myoarin

Hi again,

Americans are granted an exclusion of up to US$80,000 per year for
foreign earned income to avoid double taxation.

Form 2555 Foreign Earned Income
http://www.irs.gov/pub/irs-pdf/f2555.pdf

Instructions for Form 2555
http://www.irs.gov/pub/irs-pdf/i2555.pdf

Regards,
hummer