My question involves collection proceedings in the State of: NV
My question today is regarding the tax consequences of settling a credit card debt with a issuing company vs. collections agency (Not California as in the title!!)
When you agree to settle a debt with the issuing company for less than the outstanding balance, I know that the amount you are forgiven is considered an income and you will eventually have to pay income tax on that amount.
What happens if you settle a debt for less amount with a collections agency?
They buy these debts at huge discounts and, therefore, they are making profit on that debt you just settled. So would they be allowed to file a 1099 or whatever and make me liable for paying taxes (like I would if I settled with the issuing company)?

