I did not file a return because I never lived in Colorado.
The relative was unable to find technical employment during a brief residence in Colorado. Federal and state tax returns were filed for 2003 and 2004, but they failed to include early withdrawal income from the pension plan. All of the income that created the pension plan was earned outside of Colorado, some international. A stressed out taxpayer cannot be expected to know the fine points of state tax law shortly after arrival. In any case, payment of the tax at the time would have forced a homeless situation.
As mentioned in the original question above, I paid the federal tax and penalties for the unemployed relative for both tax years, with two checks made out on the same date. When the state picked up on it and billed later, the taxpayer paid the state tax and penalties to a collection agency in installments for what was assumed to be both tax years. In fact, that collection agency told the taxpayer that the debt was "all settled".
Now, it appears that the state claims that tax year 2004 was not included in the collection. That makes no sense, because the federal IRS should have passed on the information for both tax years at the same time.
Not only that, but the state claims to have mailed the 2004 delinquency notice to an old Colorado address after the taxpayer had moved out of state. Delivery would have failed because the post office doesn not forward mail after one year from the last change of address. That claimed failure to deliver the notice triggered penalties, interest, and collection agency fees that doubled the original amount.
Again, that makes no sense, because the state would have had the current address from the original collection agency. Such agencies operate "in behalf of" the state, so if the tax records were not updated, that is not the fault of the taxpayer.
From the taxpayer point of view, personal records were not retained after the expected statute of limitations date and several personal relocations. Old banks have responded to requests for record copies by saying the old records have been purged. Federal ans state tax return copies have not been provided as requested. The taxpayer has proof of filing, but without any supporting income or tax data.
The entire matter smells like a Zombie collection attempt to bring the case forward in time. The amount of money involved is trivial in comparison to other, flagrant cases.