Part Of Debt Reported To IRS As Income After Settlement

[bcolella189]

I received a letter offering a settlement on a debt with a collection company. I paid the amount asked and now the IRS has sent me notice that the amount not paid is listed against my taxes as income and I now owe the IRS more money since it is considered income. Is this legal?

[Mr. Knowitall]

That's both legal and typical.