Who'll collect your back taxes now?

Buried in the $388 billion, 3,646-page omnibus spending bill is a provision that would let a few congressmen examine income-tax returns.

What! Congress looking at individuals' tax returns? That invasion of privacy seemed so odious to both Democrats and Republicans that Congress reconvenes Monday in order to remove the provision and pass the bill.

But in a strange twist, many congressmen are mum about a provision in another bill, passed several weeks ago, which raises far broader privacy issues.

Under it, private debt collectors - instead of Internal Revenue Service staff - will start collecting unpaid taxes from some 2.6 million Americans.

Tax returns are among the most sensitive documents the United States government holds on an individual - and it guards them closely. IRS agents face firing, five years in jail, and big fines for "willful disclosure" of tax information. Even the CIA and FBI have to get court approval to see individuals' returns.

Now, the IRS is preparing to assign late next year $13 billion in owed taxes to private companies for collection.

Proponents see several advantages in the plan. But privacy advocates are worried, especially by a clause that allows the firms to negotiate installment payments of taxes owed. Since repayment could stretch over five years, collectors will probably have to ask taxpayers for numerous financial details to figure out how much they can afford to pay.

That's troubling because private firms already doing business with the IRS don't exactly have a stellar record in safeguarding taxpayer data. A review by the Treasury's Inspector General of more than 900 IRS contracts - obtained by a Freedom of Information Act request this past spring - stated that "contractor's employees committed numerous security violations" that placed "taxpayer data at risk" and that in some cases, "contractors blatantly circumvented IRS policies and procedures" even when told about it.

"I'm very concerned about people's personal and private records going to private collectors," says US Rep. Shelley Moore Capito (R) of West Virginia. Last month, she offered an amendment to the omnibus bill that prohibited the IRS from giving tax-collection duties to private agencies. The amendment passed in the House with a solid bipartisan majority. But there was no such amendment in the Senate version. When Senate-House conferees reconciled their bills in a closed-door session, the amendment was taken out.

That's the same bill, incidentally, that is forcing Congress to reconvene to take out the other provision about congressmen looking at taxpayer data.

Taxpayers will still have numerous protections, proponents point out. For example, the IRS will provide only phone numbers, addresses, tax year, and the amount of taxes due to the private collection agencies - not the full tax forms. And these collectors will be subject to the Fair Debt Collection Practices Act, a host of other measures, and IRS rules for protecting debtors from harassment.

Also, the IRS plans to select cases where the individual taxpayer has no dispute about the taxes owed and is not involved in tax litigation. Those cases, about 2.6 million, will be turned over to 12 tax collection agencies by the end of 2005, if all goes well, says Richard Morgante, the IRS official in charge of the project.

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