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A couple of thoughts:
Your friend should not have to pay US federal tax if she meets the requirements for “working abroad” and does not make more than a certain amount (somewhere around USD 90,000, I think). State level income tax is another story. However, as I happen to live in a state that has no income tax, I don’t know enough to comment.
She should be paying taxes in China. That she hasn’t after 5 years speaks volumes about the PRC tax authority. Still they are not to be messed with. Given that your friend has a valid work permit, it would not be difficult for the authorities to figure out that she is/has been working in China.
Generally speaking, if you work abroad, are required to pay US federal income tax, and pay tax in the foreign country where you live, you can deduct the amount paid abroad from your US tax obligation. Thus, if she chooses to be paid in RMB and is taxed in China and the US, she should get credit for taxes paid in the PRC.
This can be a very complicated matter and is often a central issue of most expat packages.
Your friend should seek the advice of a quality tax firm (e.g., PWC) to sort this out. She may owe back taxes to the PRC, but she may also be entitled to a substantial refund from the IRS.