IRS terminated its controversial outsourcing of tax collection Thursday. An agency review found tax debt collection was cheaper and more lucrative when performed by federal employees.

"IRS employees have more options available to them to resolve difficult collection cases," said Doug Shulman, IRS commissioner.

Contracts with two private debt collection firms expired Friday. The agency will hire 1,000 tax collectors this year to target collection on areas of greatest need. IRS will recruit displaced contractor employees to fill openings, Shulman said.

The program's demise ends years of controversy over private debt collection. Congress, the IRS National Taxpayer Advocate and the National Treasury Employees Unions argued private collectors cost more and collected less than federal employees.

"Now that we have the facts, ending this wasteful policy — which has come at great cost to taxpayers — and putting the job of tax collection back with the trained professionals at the IRS is the right thing to do," said House Majority Leader Rep. Steny Hoyer, D-Md.

Tell us what you think. E-mail Elise Castelli.