NEW YORK (CNNMoney.com) -- The IRS isn't exactly known for its friendly phone calls, but the agency's move to hand over thousands of delinquent accounts to private agencies means the taxman may now be working the phones with even more determination.

Several companies from the debt collection industry began their efforts last Thursday. The shift will affect 12,500 taxpayers, and only those who owe less than $25,000 and don't dispute the amount owed. Essentially, the IRS is outsourcing the legwork on some of its least glamorous cases.

The three companies that will be doing the collections are CBE Group of Iowa, Linebarger Goggan Blair & Sampson of Texas and Pioneer Credit Recovery of New York (a unit of Sallie Mae (Charts)). The companies will be paid 25 percent of the amount they are able to collect.

With the move, the IRS sheds some light on a whole category of cases that it hadn't touched for years - its own agents will continue to concentrate on higher-ticket cases, where there are greater rewards for their efforts.

People are up in arms about the change. Concerns lie with four main issues.

Hoped-for efficiencies won't occur Nina Olson, head of IRS's Taxpayer Advocacy group, argues that outsourcing won't actually save the agency money because IRS workers will still ultimately have to deal with many of the cases and because the program will initially consist of 55 IRS employees overseeing 75 private collectors. The Taxpayer Advocacy group is an internal department meant to improve the agency's responsiveness to taxpayers.

Though private collectors won't handle cases where the amount owed is in question, taxpayers may want to dispute interest and penalties. And while an IRS agent is qualified to handle such questions, private debt collectors are not - those cases will have to go back to the IRS anyway.

Potential pressure by private collectors In addition, Olson worries about taxpayers dealing with less experienced collectors. Currently, IRS agents are supposed to work with taxpayers and are required to explain their options to them. The concern is that private collectors will pressure debtors to pay up-front when they may not be financially ready to.

"IRS collection personnel and private debt collectors have different objectives," said Olson in an e-mail. "When IRS personnel are working a case, their objective is to maximize the long-term compliance of the taxpayer, even if that means compromising collection of a past debt. When private collectors are working cases, they are being paid as a percentage of past debts collected, so their objective is to maximize the immediate collection without regard to long-term compliance."

Shady tactics? Then there's the question of shady tactics. "When the legislation [allowing private collection] was passed in 2004, advocates talked about the success of the federal student loan program in using private collectors," said Chi Chi Wu, staff attorney at the National Consumer Law Center (NCLC). "But from the consumer's point of view, it hasn't been a success story."

She said there have been a number of problems with the program, and debt collectors had been caught employing such unjust tactics as printing the Department of Education's location as their return address and sending misleading telegrams through Western Union.

Security breaches? And the last thing many taxpayers want to see is that the IRS has given out information about their tax returns to a company they've never heard of, says Tom Oschenschlager, vice president of taxation at the American Institute of Certified Public Accountants (AICPA), the nation's largest professional group of accountants.

As IRS Commissioner Mark Everson points out, a majority of U.S. states already use private firms to collect delinquent taxes.

And all of the employees involved in the project will have received extensive training both from their firm and from IRS, and will have gone through an extensive background check, said Joe Householder, a spokesman for collection firm Linebarger Goggan Blair & Sampson.

"The No. 1 priority for the IRS and all three firms is taxpayer privacy and security," Householder told CNN. "We're using the highest security standards in the industry to protect the space where the information will be held, and we'll be subject to constant scrutiny by the IRS."

He said that Linebarger presently does debt collection for many other federal agencies, including the Environmental Protection Agency and the Department of Defense, and will collect nearly $1 billion for the government across all levels - country, state and federal - in 2006.

"The tax gap last year was a huge number, and it's a burden on people who do pay," he said. "Taking an extra step to reduce the gap benefits the rest of us."

But those watching the program aren't so sure that the basic incentives underlying the program are healthy.

"In theory the contracted employees are under the same rigorous ethical rules as the IRS - the Boy Scout Oath basically," said Benson Goldstein, a technical manager at the AICPA. "But you can see a tension in the system when the debt collection agency only gets compensated when the taxpayer pays up."

Critics have voiced concern that the companies could emphasize their installment plans - and neglect to mention other payment options for people who really can't afford it.

"There are a lot of rights and remedies for taxpayers that private collectors either don't know about them or they try to steer people away because it's not as profitable," said Wu.

"The people who are most knowledgeable about IRS programs are IRS employees," she said. "And the debt collection industry has a fair amount of turnover, so it's possible you could be dealing with an inexperienced collector."

Take the example of a low-income taxpayer who owes the IRS $10,000 from several years back.

Under the previous IRS system, he may have only gotten the occasional letter from the IRS - and possibly ignored it. No one had ever called him on the phone.

Now an agency will be sending him a letter, followed by a phone call, hoping to initiate a payment plan immediately. But the taxpayer may have deep credit debt and want to settle that first. Goldstein fears that the collection agency won't inform the taxpayer of all his options - including the possibility that debt could be reduced.

The IRS offers payment plans for people who lack the means to pay the full sum immediately, and as a last resort people who owe may file to enroll in the Offer in Compromise (OIC) program to negotiate the amount owed.

What should you do if you have an overdue tax bill and a collector calls you up?

If you cannot pay what the company asks for, call them and explain your financial situation in depth, recommends the NCLC, and make sure not to overpromise what you can pay.

If explaining the situation doesn't lessen the immediate demands of the collectors, you can write the collector a cease letter detailing why you can't pay and what your prospects are in the near future, and federal law requires them to stop collection attempts.

If such a letter doesn't work, get a lawyer to write you a letter - which will force collection agencies to stop contacting you.

Besides the IRS, Low Tax Clinics are available to provide advising and other assistance to taxpayers struggling with debts. (IRS document: Low Income Taxpayer Clinic List)

The IRS says that private collection agencies will be held to the same standards of service the agency requires of its own employees, and your privacy will be maintained.

(IRS document: What You Can Expect When the IRS Assigns Your Account to a Private Collection Agency)

(IRS document: Your Rights as a Taxpayer)

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