Despite huge advances in cyber security, identity and digital wallet theft is on the rise, and experts cite a perfect storm of circumstances as a major reason.

For one thing, more people are working from home, and they’re working without the protections of corporate networks which are more reliable at blocking phishing schemes than home networks are. In addition, there are more transactions being handled online these days, including the electronic forwarding of unemployment checks and other government benefits.

Then there are the lingering fears about COVID that make some people vulnerable to online tactics dreamed up by nefarious hackers that enable them to steal your personal information and access your online accounts. And having more of your information stored in the cloud doesn’t help matters in the least.

We’ve all heard the expression about “shutting the barn door after the horse has bolted.” It’s a folksy idiom that means it’s too late to try and stop something that has already happened. It’s a futile effort because, of course, the horse is history.

Unfortunately, even if you are being careful and doing all the right things to prevent identity theft, you can still fall victim to it. That’s why it is so important to know how to recover when the unforeseeable and unavoidable happens to you.

Which is why, in this post, I present SWC’s 10 Point Identity Theft Recovery Action Plan.

(Click for free download — Identity Theft Recovery Action Plan.)

Rest assured that, as your trusted tax planning and financial strategy adviser, we take every precaution to safeguard your personal information, and we’re here to help. If you’ve fallen victim to identity theft, call our offices to find out how we can be of service. We’ll get your wayward steed back in the stall.

Step 1: Don’t Panic

Fear increases your vulnerability to identity theft. Panic makes it worse. You’re not legally liable for crimes that other people commit using the personal information they stole from you. So just scratch that concern off your list.

Likewise, if someone used your personal information to steal from you, you should be able to get your money back. For example, if a con artist filed a fraudulent tax return using your name and their address to steal your tax refund, the Internal Revenue Service (IRS) still owes you that refund.

Pro Tip: While you shouldn’t panic, you should act with a sense of urgency. The faster you do all the right things, the less damage you’re likely to suffer, and the greater the chances the perpetrator of the crime(s) will be caught and brought to justice.

Keep a detailed record of all the steps you take to curtail the damage, along with all the documentation you collect along the way. A written record will smooth the path to recovering any losses and protecting you from any losses that others (for example, your bank or creditors) may suffer as a result.

Step 2: Contact All Organizations That May Be Impacted

Although identity theft involves your personal information, it also impacts companies and organizations you do transactions with, so be sure to involve them in your recovery plan:

  • Change your username and password for each compromised account.
  • Report the incident to the fraud department of the organization where the fraud occurred. This may be your bank, a credit card company, your internet service or email provider, the IRS, your retirement plan administrator, your state unemployment office, the Social Security Administration, a bona fide debt collector, your electric or gas company … you get the idea.
  • Cancel or freeze any credit, debit, or bank accounts that may have been compromised, so that no new charges or transactions can be processed without your consent.
  • Request a letter from each organization confirming that you’re not liable for any fraudulent activity on your accounts.

Keep a list of all the organizations you contacted and let them know when you receive your Identity Theft Report from the Federal Trade Commission (FTC), as explained later in this post.

Warning: Beware of “me-to-me” scams involving instant digital money transfer platforms like Zelle and Venmo and your bank. Text messages from what appears to be your bank’s fraud department may be part of a sophisticated phishing scheme. Before replying, contact your bank to confirm that the message is legitimate.

Step 3: Contact the Consumer Credit Reporting Agencies

Equifax, Experian, TransUnion, and Innovis are four of the consumer credit reporting agencies that are equipped to help companies evaluate the credit risk of prospective borrowers. They can also be valuable allies in helping you recover from identity theft and credit fraud:

  • Report the identity theft incident to one of the consumer credit reporting agencies, which will notify the other three:
  • Request a copy of your credit report and review it for any suspicious activities, such as accounts you don’t recall having opened or addresses in places you never lived.
  • Inform the credit agencies and any prospective creditors (in writing) of any fraudulent accounts and incorrect information.
  • Ask one of the three credit reporting agencies to place a free, one-year fraud alert on your account. (Extended fraud alerts may also be available at a minimum cost.)

Step 4: File a Report with the Federal Trade Commission (FTC)

The FTC can help you recover from identity theft while tracking down the perpetrators. Here’s what you need to do:

  • Report the identity theft incident to the FTC at identitytheft.gov. Using the information you provide, the FTC will create your identity theft report and recovery plan.
  • When you receive your report, review it to ensure that the information it contains is complete and accurate.
  • Keep a copy of the report.

Step 5: File a Police Report

To obtain additional documented evidence of the identity theft, report the incident to your local police department or sheriff’s office. (For additional information on contacting your local police or sheriff’s department, download a free copy of our Identity Theft Recovery Action Plan.)

Step 6: Contact Your Health Insurance Providers (if applicable)

If your health insurance account (private insurance or Medicare or Medicaid) was compromised, notify your provider to have your card/account number cancelled and obtain a new one.

Your insurance provider may also provide you with information about any unauthorized activity on your account in case you need to dispute any bills you receive for medical services you didn’t receive.

Step 7: Contact the Internal Revenue Service (IRS) (if applicable)

If you’re the victim of tax-related identity theft, get the IRS involved by doing the following:

  • If you’re one of our clients (or want to be), contact us, as we can assist with connecting with the IRS.
  • File IRS Form 14039, Identify Theft Affidavit.
  • Call the IRS Identity Protection Specialized Unit (IPSU) at (800) 908-4490.
  • Get an IP PIN from the IRS if you don’t already have one. An Identity Protection Personal Identification Number (IP PIN) is a six-digit number that prevents someone else from filing a tax return using your Social Security number or Individual Taxpayer Identification Number (TIN). It helps the IRS verify your identity when you file your electronic or paper tax return. (For more information, read How to Get an Identity Protection Personal Identification Number from the IRS here on the SWC blog, or download the post in the form of an SWC Singlette from Client Resources on the SWC website.)

Step 8: Contact Any Relevant State Tax Agencies

If you’re a victim of tax-related identity theft, also contact relevant state tax authorities to report the incident. State authorities may require a copy of your police report or IRS Identity Theft Affidavit.

Step 9: Contact Other Agencies or Organizations That May Be Able to Help

Depending on the nature of the identity theft and the means by which it was perpetrated, other agencies or organizations may be able to help, including these:

  • U.S. Postal Inspector: If you have reason to believe that the U.S. Postal Service was used to perpetrate the identity theft or use your identity to commit other crimes via mail, you can file a report at www.uspis.gov/report or call (877) 876-2455.
  • Social Security Administration (SSA): If you think someone may be using your Social Security number for work purposes (for example, to claim unemployment benefits), you can check your earnings report at ssa.gov/myaccount and file a fraud report at oig.ssa.gov/report or by calling the SSA fraud hotline at (800) 269-0271. If your SSN has been stolen and is still being used to commit fraud, the SSA can also help you obtain a new SSN.
  • Bureau / Department of Motor Vehicles (BMV/DMV): If your driver’s license was stolen or lost, contact your state’s BMV or Department of Motor Vehicles to report it and obtain a replacement.
  • U.S. State Department: If your passport was lost or stolen, call the State Department at (877) 487-2778.

Step 10: Protect Your Identity

Protecting your identity after it has been stolen may seem like closing the barn doors after your horse has escaped, but it’s still necessary. Here are some steps to take regardless of whether your identity has been stolen:

  • Use hard-to-guess account usernames and passwords.
  • Change your account passwords at least once a year, or use a password-management program like 1Password, LastPass, or LogmeOnce.
  • Store your passwords securely.
  • Activate two-factor authentication for every online account that offers it. With two-factor authentication, you’ll receive a code via email or mobile device to verify your identity as part of the logon process.
  • Review your credit report periodically. You can obtain a free credit report from each consumer credit reporting agency annually. That’s four free reports per year.
  • Place a security freeze on your credit report with all three consumer credit reporting agencies. This prevents anyone from opening a new credit card or loan account in your name without your permission. It’s a hassle having the freezes lifted whenever you apply for a new credit card or loan, but it’s worth the inconvenience.
  • Order a criminal background check on yourself to confirm that your identity isn’t being used in connection with any criminal activities.

In a way, we are all victims of identity theft. So long as criminals are committed to spending their time and effort stealing from good people instead of earning an honest living, we take on the added burden of protecting ourselves and recovering when our self-defenses aren’t enough to block their efforts.

What’s important is that we work together. Thank you for doing your part to combat identity theft and report any incidents of it. By taking the time to read this post and implement a few common-sense precautions, you’ve already done a great deal to prevent fraud and help the authorities lock down or lock up the perpetrators.

If you’re one of our clients (or want to be), and you’ve fallen victim to identity theft (or are concerned about it), let us know what we can do to help you.

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About the Author: Laura Stees, CPA, is a founding partner of SWC — Southern California’s independently owned tax planning and financial strategy advisory firm for small-business owners, real estate investors, and high-net-worth individuals. The driving force behind SWC’s brand and operations, Laura advises the firm’s clients on several fronts, including tax planning, estates and trusts, investment vehicles, legacy planning, and other net-worth-generating strategies.

Disclaimer: The information in this blog post about SWC’s Identity Theft Recovery Action Plan is provided for general informational purposes only and may not reflect current financial thinking or practices. No information contained in this post should be construed as financial advice from the staff at SWC (Stees, Walker & Company, LLP), nor is this the information contained in this post intended to be a substitute for financial counsel on any subject matter or intended to take the place of hiring a Certified Public Accountant in your jurisdiction. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through, this post without seeking the appropriate financial planning advice on the particular facts and circumstances at issue from a licensed financial professional in the recipient’s state, country or other appropriate licensing jurisdiction.