If it was Federal, that would definitely be wrong.

For State, it seems rather illogical and illegal.  However, it is possible that $7000 was 'written off' and sent to the state's Unclaimed Property.  *IF* that is the case, the department of revenue would be correct because they removed the $7000 from their tax system and the $7000 is sitting in the state's Unclaimed Property.  But I do not know the actual rules for PA, so that is just a possible theory.

https://www.patreasury.gov/unclaimed-property/