It depends on the state. Many states have a statutory limit of 2 years from your awareness of damage to sue for recovery. From your post, it sounds like it.
Unless contractually agreed to, you are not entitled to interest, and you may not be able to recover. However, if the individual proves difficult, tell him you'll have your accountant send a 1099 for the overpayment (which is income to him) and he will have to file amended returns for the year(s) in which he was overpayed. It's a good bet that he didn't declare the interest income, and he might prefer paying you to dealing with IRS.
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