NEW YORK (CNNMoney.com) - An IRS plan to use a private debt-collection company for Americans who still owe taxes has run into a major roadblock, according to a news report Thursday.

The IRS picked Austin, Texas-based law firm Linebarger Goggan Blair & Sampson as one of three firms eligible for the new tax collection contract, said USA Today.

But an unsuccessful bidder - one of 33 firms that sought the contract - filed a challenge to the selection in March, saying that Linebarger has a history of bribery, according to the paper.

The potentially lucrative contract, which would award 24 percent of the money acquired to the firm, requires the bidder to attempt collection on an estimated $1.4 billion in tax debts over the next decade, said the report.

A former Linebarger partner was sentenced to 30 months in prison in a 2002 Texas bribery case, and the agency has faced other bribery allegations since then, said USA Today.

The privatization plan is meant to supplement current IRS collection efforts without adding more employees to the agency, said the paper.

Many state and local governments currently use private collection services, according to the piece.

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Over 420,000 Americans were hit with IRS penalties for delinquency last year -- what happens when you don't file? Full story here.