IDENTITY CRISIS
Threats about, but you can minimize your identity theft risk.
Identity theft is one of the fastest-growing crimes in this country. According to the 2005 Identity Fraud Survey Report, published by consultancy Javelin Strategy & Research, more than 9 million Americans were victimized by identity theft in 2004, costing consumers about $5 billion and businesses more than S-50 billion.
Most identity theft victims pay little or no out-of-pocket costs - credit card companies and other businesses bear most of the losses. Still, the crime exacts a heavy financial and emotional toll on victims and their families. Not only can it take weeks or months to put your finances hack in order, but you may also have difficulty obtaining credit or qualifying for a loan until the matter is resolved. And identity theft may cause problems with the IRS.
IDENTITIES ARE EASY TO STEAL
Thieves need remarkably little information to take over your identity. Armed with your name, date of birth and Social Security number (SSN), they can open new credit card and bank accounts, establish telephone or wireless services, buy a car, and more - all in your name. Crooks can run up charges on your existing credit cards or use counterfeit checks to drain your bank account.
The impact of identity theft goes beyond finances. A thief may obtain a driver's license or other identification with his or her picture and your name, giving your name to the police during an arrest. When the offender fails to show up for a court date, your name will be on the arrest warrant.
Besides nabbing your wallet or purse, thieves can capture your identity by:
- Stealing records while on the job,
- Hacking into an institution's computer systems,
- Bribing or conning an employee into revealing information,
- Rummaging through your trash,
- Stealing your mail,
- Filing a fraudulent change-of-address form to divert your mail to another location, or
- Using computer spyware or other electronic means.
An identity thief may even pose as a representative of a legitimate company or government agency, either by e-mail ("phishing") or phone ("pretexting" ).
TAXING PROBLEMS
In one phishing scam, identity thieves attempt to trick taxpayers into revealing personal information by sending an e-mail claiming that the taxpayer is under investigation for tax fraud. The e-mail directs the taxpayer to a legitimate-looking IRS Web site.
But that's not the only way identity theft and tax records can collide. In another scenario, an offender uses your name and SSN to file a fraudulent tax return and steal a refund. Typically, he or she files the return electronically as early in the filing season as possible. Later, when you file your return, the IRS computers will flag it as a duplicate and freeze any refund you may claim.
Still another scheme involves a person who, wishing to conceal his or her identity, uses your SSN to get a job. The employer reports that person's W-2 wages to the IRS under your name, which leaves you with underreported income on your return.
WAYS TO PROTECT YOURSELF
There's no absolute protection against identity theft, but there are a number of precautions you can take to minimize your risk. Areas to consider include:
Credit reports. The major consumer reporting companies are required to provide you with a free copy of your credit report, upon request, at least once every 12 months. Take advantage of the chance to review it for suspicious activity.
Passwords. Don't use readily available or easily guessed information, such as your date of birth, mother's maiden name, the last four digits of your SSN or a series of consecutive numbers.
Personal records. A surprising number of identity thefts - 11.4%, according to the identity fraud survey mentioned above - are committed by friends and relatives. So safeguard your Social Security card, tax records, bank statements and other personal information in your home.
Don't forget about records outside your home, such as W-2 forms and others your employer has with your SSN and other sensitive information. Ask your employer, banks, health care providers and other institutions about how they protect your personal information.
Receipts. Shred charge receipts, bank statements, credit card offers and other sensitive documents before throwing them away.
Mail. Remove mail from your mailbox promptly. During vacations, place mail delivery on hold or ask someone to pick it up.
New checks. Pick them up at the bank; don't have them mailed to your home.
Information stored on computers. Use antivirus software, passwords, firewall programs and other protections.
Above all, don't provide personal information on the phone, by mail or online unless you initiated the contact or you're confident the person you're dealing with is legitimate. And try not to give out your SSN unless it's absolutely necessary. If a business asks for your number, find out why and ask whether alternative identifiers are acceptable.
THE IRS's RESPONSE
Until recently the IRS had no agencywide policies and procedures for dealing with identity theft, making it difficult for taxpayers to resolve these issues. Since 2005, the IRS has adopted several recommendations from the Treasury Inspector General for Tax Administration, which independently oversees the IRS. They include developing an Enterprise Identity Theft Strategy, which includes updated communication for the taxpayers, and modernizing its processes to dramatically reduce the time needed to resolve identity theft issues and to ensure taxpayers are treated fairly and consistently.
If you may be a victim of identity theft, contact your tax advisor immediately to discuss strategies for quickly resolving the matter.
Encourage Thieves to Pass You By
Determined thieves can break into almost any home, but you still lock your doors and windows and turn on your alarm system to make it more difficult for them to steal from you. You should take the same precautions to help prevent identity theft. It's difficult to stop sophisticated thieves who are determined to steal your identity, but if you take steps to protect yourself they may pass you by as they search for an easier target.
