By John K. McGill, JD, CPA, MBA and Shanna Morales, CPA
We often hear stories from family, friends, and clients regarding identity theft. This can take the form of identity fraud, which is usually an isolated event of money stolen from a current account, or identity theft, a case in which someone uses your personal information to open a new account.
Identity theft falls under consumer protection and is monitored by the Federal Trade Commission. Since there is a lot of financial risk in an identity theft situation, it is very important to discuss the specific ways that identity theft can occur, ways to protect your identity and personal information, and what to do if you become a victim.
Below are a few ways that identity theft occurs:
- Stealing -- A thief steals your wallet or purse and uses your bank cards or credit cards, along with information obtained from your driver's license.
- Phishing schemes -- A company or agency sends an email requesting personal information.
- Trash picking -- A thief goes through your trash looking for items that contain personal information.
- Skimming device -- A thief uses a device that will store your personal information when you use your credit or bankcard.
While it is difficult to be vigilant 100% of the time, there are steps that you can take to minimize the possibility of this theft:
- Shred all documents that contain your personal information, even if only your address.
- Read all bank and credit card statements when you receive them.
- Do not respond to any emails or phone calls from an agency asking you to confirm personal information. The IRS and other government agencies don't request information via email; these agencies send letters.
- Do not carry your Social Security card; ensure that it is maintained in a safe location.
- Opt out of unnecessary credit card and insurance requests. To sign up to opt out, visit www.optoutprescreen.com. You will have two options -- one is for five years via the website and the other is for a permanent opt out election that you must print and mail in.
- Review your credit report at least once during a 12-month period. To do so, visit www.annualcreditreport.com and request your free credit report. You are entitled to free reports from the following companies: Equifax, Experian, or Transunion. You can request these all at one time or order them separately every four months.
- Use antispyware and antivirus software on your computers and update the software regularly.
- Cover your key input at machines where you have to type in PIN numbers.
- Only use secure websites and networks.
- When travelling out of town for an extended period of time, request the post office hold your mail.
- Convert all statements and bills to an electronic format.
If you become the victim of identity theft, you will have many items to monitor and address. If the theft involves your banking information, you may have a random purchase or someone may have opened a new account in your name. If this is a limited theft, you will need to work with your bank and follow all the steps the bank requests you to perform. These steps usually include filing a form stating that you did not use your card for that purchase. Banks usually have limits on these random acts and will reimburse you for the loss, typically up to $500.
If the theft is more involved and not just one purchase, you need to do the following things:
- Contact all of your banks and credit card companies.
- Notify one of the three credit bureaus.
- Close any of the accounts that have been tampered with or opened under fraudulent information.
- File an identity theft report with the FTC. (This report is an FTC-affidavit.)
- If the theft occurred using your federal income taxes or via other information that could affect your personal tax returns, you should file Form 14039, "IRS Identity Theft Affidavit."
- File a police report for proof of the crime.
- Report all suspicious contacts to the FTC.
While unsettling, identity theft is an ever-growing trend. The steps and practices listed here are designed to decrease your chances of becoming a victim. Both the IRS www.irs.gov/identitytheft and the FTC www.ftc.gov/idtheft will provide you with more information on what to do if you are a victim, as well as provide further insights on what to do to help prevent identity theft.
John McGill provides tax and business planning exclusively for the dental profession and publishes The McGill Advisory newsletter through John K. McGill & Company, Inc., a member of the McGill & Hill Group, LLC. Shanna Morales provides accounting and CPA services through Elliott Davis, affiliate of the McGill & Hill Group, a one-stop resource for tax and business planning, practice transition, legal, retirement plan administration, CPA, and investment advisory services. Visit www.mcgillhillgroup.com for more information.
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