DOES ANYBODY REMEMBER the song lyrics. "They're Coming to Take Me Away--Ha, Ha"? Treasury Inspector General for Tax Administration Pamela J. Gardiner announced that the IRS annually planned to place 2,600,000 delinquent taxpayer accounts with private collection agencies. Happily for taxpayers, the

The privatization of tax collection, sometimes called "tax farming," is an ancient practice. The Ptolemaic Egyptians apparently engaged to it first, followed by the Greeks. Romans, and English (the latter in the Middle Ages). Private collection for real estate taxes is practiced today by most jurisdictions in the U.S.

Pres. Bush included a proposal for private collections in the Administration's fiscal year 2004 budget request to the Internal Revenue Service. H.R. 1169, which would have implemented the new guidelines, was introduced by House Ways and Means Oversight Subcommittee Chair Amo Houghton (R.-N.Y.) in March, 2003. According to Treasury Dept. estimates, the initiative would have generated an additional $46,000,000 in revenue for 2004, $476,000,000 during the five-year period ending in 2008, and as much as $ 1,000,000,000 by the end of 2013.

IRS feels pinch

During the 1990s, the IRS saw its personnel levels decline, and felt hamstrung by a 1998 law that greatly restricted its agents' activities. Soaring levels of uncollected taxes have been the result. Outstanding back taxes are estimated at around $13,000,000,000. This is not the first lime the government has tried to utilize private tax collectors. In 1996 and 1997, Congress earmarked $13,000,000 for that purpose. Collectors, however, were employed to help the IRS locate and contact taxpayers only. They reminded citizens of their outstanding liabilities mad suggested payment options. If the taxpayer agreed, he or she would be transferred from the investigators to the IRS. Agency workers were paid a flat fee, regardless of the amount eventually collected by the government.

This pilot program was discontinued because of what the General Accounting Office called "disappointing results." While the IRS garnered aa additional $3,100,000 from the initiative, thai only covered expenses. The argument for privatization is simple. There is $13,000,000,000 out there that belongs to the government. If it cannot collect, that is $13,000,000,000 more the rest of us have to come up with!

According to IRS Commissioner Mark W. Everson, these tax cheats "... are taking advantage of the fact that the IRS cannot continually pursue each taxpayer who fails to pay a tax liability." There is another side to the equation, however. The Houghton bill would have allowed the finns to keep up to 25% of the money recovered. How aggressive do you think they would have become with that kind of reward as incentive? "I want to stress in the strongest possible terms," Everson emphasized at the time, that private collectors would be prohibited from threatening or intimidating taxpayers.

Colleen Kelley, president of the National Treasury Employees Union, viewed the proposition as a costly and risky scheme that would have led "'to a gross invasion of the privacy of American taxpayers. This proposal [would have] cost the taxpayers more money than having the work done by IRS employees, and ... jeopardize the rights and privacy of thousands of taxpayers by putting private taxpayer files in the hands of private companies." The IRS now must do the job itself. Rightly so, since the collection of taxes inherently is a government function. It should not be delegated to the private sector. Moreover, there is the issue of privacy.

Collecting millions

Each IRS recovery officer collects an average of $900,000 annually. A report by former IRS Commissioner Charles Rossotti estimates that it would cost $296,000,000 to hire additional IRS compliance employees whose job it would be to focus on accounts receivable. That probably would result in additional collections of $9,470,000,000--a return of $31 for each dollar spent. In comparison, private agencies would have cost $3,250,000,000 to collect $13,000,000,000--a return of $3 for each dollar spent.

If you owe the IRS, there are ways to protect yourself. You can file an Offer in Compromise. This is a tender to pay the IRS, but on a reduced basis. It can be based on doubt as to liability, doubt as to collectibility, or economic hardship. File Form 656 to make your offer. It is submitted with Form 433-A, which lists your assets, income, liabilities, and expenses. By law, all collection activity must cease while the offer is outstanding. This also is true of an Installment Agreement. That is a contract between you and the IRS for you to pay off your debt, with interest, over time. Use Form 9465 for the Installment Agreement. You can acquire all forms online from www.irs.gov.

As for the idea of private income tax collectors, as House Ways and Means Committee member Earl Pomeroy (D.-N.D.) noted, "It's an idea thai, frankly, is not ready for prime time."

Jeff A. Schnepper. Associate Economics Editor of USA Today, is an attorney and estate planner in Cherry Hill, N.J., and author o[" How to Pay Zero Taxes.