Americans who were able to to settle a debt at a discount last year will have to pay taxes on the amount that was forgiven. "If you had any debt that was forgiven and the amount you saved was more than $600, the IRS considers that taxable income," explains Bill Hardekopf, CEO of Lowcards.com. This amount must be claimed on the consumer's tax return. For example, if a consumer owes the credit card company $15,000 and the company allowed the consumer to settle the account for only $10,000, the $5,000 in forgiven debt is considered taxable income. Any creditor or debt collector who agrees to reduce the balance owed by at least $600 must report that to the IRS on a form 1099-C. Consumers who miss filing forgiven debt are at risk of being audited or having to pay penalties.