I would like to ask about the tax treaty between Italy and the US in the case
Of research scholars (J-1 visa).
Under the treaty, J-1 scholars are exempt from all US taxes for up to two years.
I am wondering what happens if one receives an extension to his job and remains,
Let's say, for a third year. Does he start paying taxes for the third year
Or does he need to pay back all taxes, even for the first two years?

Many thanks.

In the tax treaty, the exemption is for two years. After two years you don't get the exemption. The treaty does not say that the exemption is lost for the entire visit.

Yes, in third year you start paying the taxes. You do not pay back the taxes for previous two years.

Read Your U.S. Tax Return: U.S. Tax Treaties for Professors, Teachers and Researchers

It is also possible (in general) to get the exemption extended for an extra year. You should investigate that possibility with your sponsoring organization.

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Originally Posted by AtlantaTaxExpert

It is also possible (in general) to get the exemption extended for an extra year. You should investigate that possibility with your sponsoring organization.

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I'm not aware of the Italy-US treaty having an option for an extension. However, I believe that the treaty does not require that taxes be paid retroactively if you extend into the third year.

I will yield to TTE's greater expertise on this issue. I answered without conducting the research.