If you negotiate a settlement, you’ll usually receive an Internal Revenue Service (IRS) Form 1099 that shows the amount of money representing the difference between the negotiated settlement amount and the balance in full. There are several types of 1099 forms that report on earned gross income (money from which taxes have not been deducted). You might get a Form 1099MISC, which applies to miscellaneous income. A 1099MISC shows the total amount you saved by negotiating a settlement, so look for an accompanying letter that breaks down how much of your settlement is. This is why it is important to have a legal, signed, document before sending any money which theoretically pays off your account debt. The settlement agreement may be the only letter.
“If you are scammed by a debt collector and they mentioned a settlement, and if you have proof, ask them if they want to be guilty of fraud or guilty of failing to send your 1099″ said advocates at Household - HSBC Watch.
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