February 21, 2013

You know it’s crossed your mind.

You’re pressed for time and need to run a quick errand. It wouldn’t hurt to run into the store/post office/dry cleaner/whatever and not take the extra time to secure your belongings in the car. After all, you’re locking the doors, right?

Or this: it’s been awhile since you’ve changed your computer passwords (which all happen to be the same password for every website on which you conduct transactions). You procrastinate and decide to change your password the “next” time.

A broken window later, and not only is your property gone, but so are your insurance cards and other identification that can be used to mine personal information. One semi-sophisticated hacker breaches your security, and she’s using your tax-refund money to party in Belize while opening credit accounts hither and yon.

Tax-Related Identity Theft on the Rise

The Journal of Accountancy recently published an alert regarding tax-related fraud: “The IRS recently reported an inventory of more than 450,000 identity theft cases. For the 2011 filing season, the Treasury Inspector General for Tax Administration (TIGTA) estimated that identity-theft-related fraud accounted for approximately 1.5 million tax returns in excess of $5.2 billion.” Currently, the IRS has limited resources and funding to address this problem. Consumer vigilance is the first line of defense.

Once it happens, identity theft can be like a bad penny; it can keep turning up to haunt you.

By the Numbers

  • 9 million: the number of Americans the FTC estimates have had their identity stolen
  • 2.6 million: the number of tax returns pulled by the IRS for possible identity theft
  • 631: the mean out-of-pocket $ to consumers
  • 33: the average of hours taken to resolve identity theft/fraud
  • 45: percentage of identity fraud caught by consumers

The range of identity theft is myriad, particularly when it comes to social security numbers. Thieves use stolen social security numbers to file false tax returns for refunds, obtain employment, apply for credit or even receive medical treatment.

While you should be ever-vigilant against identity theft, the tax season provides a window of opportunity to ensure you are taking the necessary steps to protect your identity and personal information.

An Ounce of Prevention Is Always Preferable…

Even though there aren’t any full-proof methods to prevent thieves from stealing and using our personal information, there are a few simple, precautionary steps you can take to minimize the likelihood of identity theft:

  • Don’t leave personal information in your car. If you have no choice, then make sure the information is in the trunk. Also, make sure you place items in the trunk before you leave your current location and park your car elsewhere. Sometimes, thieves will wait in a parking lot and watch if people place items in their trunk.
  • At home, lock personal information in a safe or file cabinet
  • Don’t share passwords with others
  • Don’t keep a list of passwords saved on your laptop or on a piece of paper that others can find. (There are many apps that are available on the market that can be a safe and effective tool to keep track of passwords, if used properly.)
  • Password-protect documents when emailing to others
  • Use client portals (such as the Clark Nuber portal) to securely upload sensitive financial documents to your advisors
  • Monitor your bank, brokerage and credit accounts regularly to see if there is any strange activity
  • Monitor your credit report regularly and report any discrepancies early
  • Keep current on the latest phishing scams. The IRS has an alert page that updates on the latest scams using the IRS name and logo: https://www.irs.gov/uac/Suspicious-e-Mails-and-Identity-Theft

…But if You Need a Pound of Cure

Unwinding the damage after having your (or your children’s) social security number stolen is a multi-step process:

  • Submit an initial fraud alert with one of the credit reporting companies (Equifax, Experian or TransUnion) and confirm that the initial alert will go out to the other two credit reporting companies
  • Order credit reports from each credit reporting company (many times this is free if you submit an initial fraud alert)
  • File an Identity Theft Report with the FTC (Federal Trade Commission)
  • Report the theft to the police
  • Contact each of your financial and medical institutions to let them know that a theft has occurred (in some cases, you may consider adding an extra password to your accounts to check your identity when contacting these institutions)
  • Contact the IRS to submit the IRS ID Theft Affidavit Form 14039 and request a new PIN for filing future tax returns
  • Monitor your credit on a regular basis
  • Consider putting on a credit freeze, so no one can open new accounts under your name
  • Monitor all bank and credit card statements and quickly report any unauthorized charges

Note that there are services available through banks and other providers, which will monitor your credit and assist you in case of identity theft. Some offer to insure against loss if your identity is compromised.

Most of the services offered (except for the insurance) are steps you can take yourself if you are so inclined. However, these services are gaining popularity due to the increasing concern about identity theft. As with any service, you should investigate the provider and be comfortable with the cost/benefit before making the decision to buy.

Lastly, this is also a good time to get a thorough understanding of your finances. It is much easier to deal with these types of crises if you (and your family) have a list of all your assets and liabilities, and to know where they are located and who to contact in case something happens.

There are more detailed tips on the FTC website or the IRS website.  Also on the IRS website is a subscription page where you can subscribe to timely tax tips and alerts.

© Clark Nuber PS, 2013.  All Rights Reserved

This article contains general information only and should not be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. Before making any decision or taking any action, you should engage a qualified professional advisor.