The Ninth Circuit Court of Appeals held in United States of America v. Page, that the two-year limitations period to sue to recover an erroneous refund commences on the date the refund check is cashed, not when it is received.

In the case, Jeffrey Page received a $491,104.01 check from the IRS for his 2016 tax refund on May 5, 2017, and cashed it almost a year later on April 5, 2018. The refund check was sent to Mr. Page due to an error by the IRS and the IRS demanded the return of the money after the check had been cashed. Mr. Page returned $210,000.00 in response to the IRS’s demands but kept the remaining $277,641,01.

On March 31, 2020, the IRS sued Mr. Page for the balance in District Court. Mr. Page failed to answer, and his default was entered. The government moved for entry of a default judgment which the District Court denied because it believed the Complaint was untimely because the statute of limitations had been triggered when Mr. Page received the check and issued an order to show cause why the Complaint should not be dismissed with prejudice.

The government responded that it was the date that the check cleared, not the date of receipt, which triggered the statute of limitations. After limited discovery on the issue, the District Court rejected the government’s position and dismissed the case.

The government appealed and the Ninth Circuit reversed. It held the statute of limitations begins to run on the date of receipt of payment and thus, runs from the check cashing date.

If you issue or receive a refund that might be in error, consult with your legal counsel on how to best proceed.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.