Get a lawyer to go with you directly to the IRS requesting a voluntary audit of the matter...the IRS I think might actually be “helpful” since you are requesting their help. If the debt was settled legally as you say then the IRS can include that in your record. They might even start looking at the company issuing those 1099Rs to see if they are attempting to commit federal fraud! After all, they like taking down the bigger companies who might have to cough up more dough...not penny ante stuff like yours.
I’ve contacted the IRS. Their position is I have to prove that I don’t owe it. Otherwise, taxes on it are roughly $6,500. Since the bank doesn’t answer my letters about why they issued the 1099R this is something of a problem. I’ll probably wind up spending another two grand on a lawyer.