More about protecting your identity....|
What if you are a victim of identity theft? First,
realize it's not the end of the world. One particular govt agency, which
requires you to submit sensitive information along with payment by 15
APR every year, is noted for the fact its employees sell personal
information to other parties. Until the Fair Tax
www.fairtax.org is passed so this
"use your govt job to conduct crime without fear of reprisal" system is
abolished, it's likely that at least part of your identity is already
Though not the end of the world, identity theft is
nonetheless a serious matter. On average, victims of identity
theft spend $1,100 and 600 hours to set things straight. That $1,100
pertains to what they spend to correct the problem, not what they lose
as a consequence of it.
Those figures are for incidences not directly traceable to criminal
activities conducted by (some) employees of the aforementioned agency.
When those folks get involved, the costs of defense and remediation can
quickly climb to multiples of your annual wage and the time can easily
exceed that 600 hour figure each year. It's easier and cheaper to
mount a murder defense than to fully engage these folks in a legal
battle (and yes, that's fact, not hyperbole).
The single biggest source of catastrophic loss due to misuse of
personal information is the aforementioned agency. Unfortunately, we are
still waiting for CONgress to do something other than pass our money on
to the clients of lobbyists.
Passing the Fair Tax, for example, would be a good first step. In
addition to abolishing the aforementioned agency and lowering the cost
of taxation even for retired folks, such common sense legislation
provides a huge number of benefits. What it doesn't provide is a wealth
transfer to the clients of lobbyists, so CONgress can't see any reason
to pass it.
But the aforementioned agency isn't the only source of
identity-related risk, and it's not going away any time soon. This means
you must take specific steps to prevent, detect, and
remediate identity-related losses in the
The most important thing you can do is look for an
egregious breach of security such as outright identity theft. For
example, reviewing credit card and bank statements online weekly or even
daily, rather than waiting for the paper version. Another example--you
receive credit cards, card statements, bank statements, cell phone
bills, welcome kits, and other information indicating new financial
arrangements, subscriptions, or purchases, you didn't make.
When someone from the aforementioned agency sells
bits of your personal information, that's not identity theft. It's still
theft, but not of your whole identity. With identity theft,
another person poses as you and conducts business. This person may enter
into all kinds of contracts, mostly in the form of unsecured loans, to
obtain merchandise and leave you with the tab.
If you suspect someone may have stolen (don't wait for
confirmation) your identity, file a police report with specific details
about the theft. Before you contact the police, organize your
information and prepare documents the investigating officer can take
with him or her. Don't assume the police officer taking the report is
well-versed in any of this or really knows what to do or what
information is needed and can coach you on what information to provide.
Organize all relevant information and supply it all.
Someone at the police department will sift through this information
and create an Identity Theft Report. Ask if they will send a copy of the
report to each of the three credit reporting companies and to you. The
report entitles you to certain legal rights with these companies. For
example, it entitles you to having permanent blocks or even outright
removal of fraudulent information on your credit report. Note that this
same protection does not apply to fraudulent information filed by the
While you're waiting for a police officer to arrive and take your
information for the report, contact your credit card companies, bank(s),
and others you have financial contracts with. Let them know the
situation. Credit card companies are more than happy to cancel your
existing cards and issue new ones. Banks will typically close your
existing account(s) and open new ones. But let them advise you on
what to do. It's their system, and they know how it works.
Fighting a particular incidence of identity theft this way is a
temporary measure. It addresses the symptoms, without curing the
underlying disease or removing the vulnerabilities. So, do this. File
with your state to create an LLC. Contact the IRS for an EIN for that
LLC. Then, open new credit cards and accounts on that LLC. An LLC enjoys
a great deal of legal protection, so don't be surprised when a bank also
insists on using your personal tax ID and making you personally liable.
That is just sound business. For example, you want your LLC to hold your
mortgage. The bank says you personally have to be liable.
Now, a twist here is if you open the LLC this way you lose LLC type
protections in other circumstances. So, form one LLC for which you allow
"piercing of the corporate veil," for example to cosign your mortgage.
Form one or more other LLCs for other purposes. The LLC that you allow
to be pierced serves as another signatory, essentially. This provides
you with an automatic stop on transaction attempts by someone who steals
your personal identity. That person would also have to steal the
identity of your LLC.
Many "experts" advise closing all accounts in the case of identity
theft. That's poor advice. Closing an account may cost you dearly. For
example, closing your cell phone account by cancelling your contract may
cost you several hundred dollars.
A person who stole your identity may cancel your cell phone account,
a lease you have, and even your utilities just to keep you off balance
and too busy to address other issues arising from the identity theft.
Rather than blindly close accounts, contact each party with whom you
hold an account and explain what happened. It may make more sense just
to add a signatory (such as your LLC for this purpose) or to put some
other restriction on the account. Ask if they would prefer you do this
or go through the hassle of closing and opening accounts.
Now, most importantly, we go back to that agency. These folks don't
care about actual circumstances. If someone files a federal tax return
fraudulently using your taxpayer ID (your SSN), this agency may wait
like a snake in the grass for decades before hitting you with back
taxes, interest, and penalties. With that much time, a small "debt" of a
few hundred dollars can grow into a $50,000 tab. By the time you find
out about this problem, it will be too late for you to do anything about
it. You will simply owe the amount. That's how the law works.
Yes, we can all hope that CONgress will finally abolish this
pestilence of an agency, but don't hold your breath. This agency has
been a source of terror, fraud, waste, theft, and corruption for nearly
a century now and CONgress hasn't yet done what it obviously should do.
Each member of CONgress takes an oath to defend the American people from
all enemies foreign and domestic. In the case of this agency, CONgress
simply ignores its oath.
The existence of this agency leaves you open to all kinds of
liability and abuse. For example, employees of this agency colluded with
Jay Hoyt back in the 1970s to use the personal information of several
thousand people for fraudulent tax purposes. Hoyt went to prison for
life and died there, while his cohorts kept their jobs at the agency and
were never indicted.
Even today (four decades later!), the victims are on the hook for
taxes, interest, and penalties in amounts so extreme as to be unpayable.
These victims are constantly harassed by collection actions, have liens
on all of their property, and suffer various indignities on a regular
basis. Sounds like Idi Amin's Uganda, but it's the United States we are
You may be saying, "But wait! The 1970s were so long ago. Surely, the
3-year statute on assessment and the 10-year statute on collections have
This agency has all kinds of cute ways to get around the statutes of
limitation and other laws that allegedly protect people from abuse,
theft, harassment, property seizures, and various acts of terror and
intimidation. If someone who holds a job in this agency decides to cover
up his or her participation in fraud, then laws do not matter. Period.
The long-term solution to this lawlessness is to pass the Fair Tax
www.fairtax.org. But until such
time as the USA joins the ranks of countries that enjoy the rule of law
(rather than this lawlessness), you are highly vulnerable. Watch your
And prevail upon your misrepresentatives in CONgress to support the
Fair Tax. Contact those turkeys once a month--set a date on your
calendar. This is the single most effective action you can take to
provide adequate protection of your identity, your financial security,
and your personal freedoms.
While waiting for this desperately needed legislation to be passed,
take the other actions outlined above. Constant diligence helps detect a
breach. Common sense measures help prevent one. Don't give out
information you don't have to give out.