You can often get the IRS off your back through Bankruptcy. Thousands have gone through one of the Bankruptcy chapters and regained their freedom from the IRS.
The IRS requires creditors to issue a 1099-C form to individuals who have had their debts forgiven or settled for less than the amount owed. It applies to debts in excess of $600. http://www.irs.gov/uac/Form-1099-C,-Cancellation-of-Debt
Contrary to popular belief Personal Income Taxes frequently can be discharged in Bankruptcy, including Chapter 7 and Chapter 13.