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Cook Potatoes In a 3-quart saucepan cook potatoes in salted boiling water until fork-tender, about 12 minutes; drain.
Cook Bacon Meanwhile, in a large skillet cook and stir bacon over medium-high heat until crispy, 7 to 10 minutes. Remove bacon with a slotted spoon to a plate lined with paper towel to drain; reserve for topping. Drain all but 1 tablespoon grease from the skillet. Return skillet to medium-high heat. Cook and stir shallots and garlic in reserved drippings until translucent, 2 to 3 minutes.
Assemble Dish In a large bowl combine shallot mixture, cream cheese, cheddar cheese, sour cream, and butter. Add the potatoes; beat with an electric hand mixer until just smooth. Do not over beat. Season with salt and black pepper. Transfer potatoes to a serving dish. Serve topped with reserved bacon and chives.
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