Editors' pick: Originally published May 18.
You're turned down for a loan mysteriously. You rip open the credit card bill and find a lot of charges you never made, or even heard of. You file your tax return and find that somebody already has filed using your Social Security number.
Congratulations: Your financial identity has probably been ripped off. What now?
"It does seem that the sooner you catch an I.D. theft, the easier it is to fix," says advisor Sheri Iannetta Cupo of SageBroadview Financial Planning in Morristown, N.J. and Farmington, Conn.
According to the I.D.-theft protection company Identity Guard, thieves can nab your sensitive info many ways, from stealing your wallet, purse or mail to going through your trash for credit card statements or bills. They can peek over your shoulder while you're at the ATM (aka shoulder surfing) or con you using just a single piece of your information to hook you into trusting them (pretexting).
Cupo recommends monitoring your checking and credit cards frequently, reading statements and at least eyeballing activity a few times a week online to ensure activity is yours and not fraudulent.
"Banks and credit card companies are getting better at recognizing fraudulent activity and shutting it down until they contact customers to verify if activity is legit," Cupo says. "The most common first sign is activity on credit cards or checking -- via debit cards -- that you don't recognize. We also still see a fair [number] of clients who find out they're victims of ID theft when they file their tax returns."
Earlier this year the Internal Revenue Service tagged more than 31,000 fake returns that involved ID theft. That was even before the last filing season entered its home stretch - and only the crooks the feds caught.
So widespread is the crime that the U.S. House just passed H.R. 3832, the "Stolen Identity Refund Fraud Prevention Act of 2016," aimed to establish a centralized point of contact at the IRS for victims and improve taxpayer notification of suspected ID theft, among other measures. The bill now moves to the Senate.
According to the IRS, you may not even know something's amiss until you e-file your return and discover that a return already has been filed using your Social Security number. The IRS may send you a letter regarding a suspicious return using your SSN - or even send you a tax bill for a year when you didn't file a return.
"For the taxpayer, it's quite frightening when they've been victimized by tax ID theft," says Janet Sienicki, an enrolled agent in Schererville, Ind., who confirms the frequency of the crime. "Their tax professional should assist them in understanding the subsequent steps and precautions for resolving the situation, as well as what to expect in future years."
The IRS always begins correspondence with a postal letter, Cupo adds.
To begin recovering from tax-related ID theft, file the IRS "Identity Theft Affidavit," Form 14039. You can also call the IRS ID protection unit at (800) 908-4490. You should also file a police report.
The Federal Trade Commission recommends you:
- File a complaint with the FTC at identitytheft.gov
- Contact one of the three major credit bureaus to place a fraud alert on your credit records: Equifax, (800) 766-0008; Experian, (888) 397-3742; and TransUnion, (800) 680-7289
- Contact your bank and other financial institutions to close any accounts opened thieves opened or tampered with.
Before the problem, you can buy an ID-theft rider on some homeowner's insurance policies, protection that reimburses out-of-pocket costs and can help with the notifications and other recovery moves. Most credit cards come with at least some automatic coverage and card companies such as American Express provide free ID-theft assistance.
Phishing remains a common tool in ID theft - and sometimes an especially tricky ploy to spot. This crime involves hackers accessing files on your computer that could contain the keys to your identity. You might even voluntarily surrender the info via email, as one common phishing scam involves crooks pretending to be the ones informing you that your ID has already been stolen.
"I'd like to see people more careful with what they email," Cupo says. "We still see people emailing … documents containing Social Security numbers that should be sent securely. Do all [you] can to not make it any easier for thieves."