The trio of private debt collection agencies that the Internal Revenue Service selected for a pilot program will soon be able to come knocking. The agency was due to turn over data on 12,500 taxpayers - each owing $25,000 or less in back taxes - toward the end of August.To assist the agency in collecting back taxes, the 2004 American Jobs Creation Act authorized the IRS to hire private firms to collect federal tax debts. IRS Commissioner Mark Everson has openly admitted that the program will cost more than the agency simply hiring more tax collectors, but under federal budget rules, money spent to hire collectors is treated as a discretionary expense, which Congress has been cutting.

The privatized program is outside the budget rules because, except for the start-up costs, the collectors will be paid from the proceeds.

In the second phase of the project, scheduled for 2008, the IRS plans to contract with up to 10 firms and distribute about 350,000 past-due tax accounts. Over the course of 10 years, the agency expects that the private firms will help it collect an additional $1.4 billion in outstanding taxes. The collection agencies will keep about $330 million, or between 22 and 24 cents on the dollar.

The agency has said that a number of safeguards have already been put into place to ward off scams, and that the agencies will contact taxpayers only by telephone or mail - not the Internet - and will instruct them to send all payments directly to the Treasury Department, not the private collection agencies themselves.

The IRS has posted a number of resources about the program, as well as a taxpayer-focused pamphlet, on its Web site, at,,id=161179,00.html.

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