IRS Plan To Outsource Tax Collection Raises Security Concerns

By Larry Greenemeier, InformationWeek

The Internal Revenue Service by March expects to award contracts to three private-sector companies to help the agency improve its ability to track down deadbeat taxpayers. Yet despite carefully worded security stipulations written into the IRS's request for quotes from prospective contractors, concerns remain regarding the government and the business world's ability to adequately protect sensitive information.

President Bush gave the IRS the power to use private-sector contractors when he signed the American Jobs Creation Act in October 2004. The act created Section 6206 of the Internal Revenue Code permitting contractors to be used to help collect taxes in cases where the tax owed is not in dispute. The IRS, which started looking for contractors last October, says using them for debt collection will help increase the amount of tax liabilities collected each year, leading to an estimated additional $1.4 billion dollars in tax revenue over the next 10 years.

"Taxpayer information on file with the IRS is and will remain private and secure," an IRS spokeswoman said Thursday. Contractors will only be able to communicate with taxpayers via telephone or written correspondences, except under special circumstances.

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