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5 Smart Ways to Deter Identity Theft Don't forget that the bad guys are always out there. Stop them cold with these preventive measures.

By John Hewitt Edited by Dan Bova

Opinions expressed by Entrepreneur contributors are their own.

You've heard the expression, "Locks were made to keep honest people honest." The same may be said for identity theft protection.

Related: IRS Hack Affects More Than 100,000 Taxpayers

You can do everything within your power to keep your information private, but hackers and criminals intent on stealing and using your identity are also intent on finding a way to make it happen. They're crafty. They're persistent.

That doesn't mean you shouldn't take steps to protect your personal information. It just means you also need to be persistent about protecting your information and become aware of the steps to take if your information is compromised. Such knowledge will allow you to act quickly, and possibly stem the damage.

1. Shred old tax records.

Tax records should be kept for at least three years in a secure location inside the home. When disposing a tax return, be sure to use a paper shredder. Also, if you plan to sell or discard your computer, keep in mind that electronic files may remain on the computer's hard drive even after you have deleted them.

2. Be suspicious of "IRS" phone calls.

The IRS has warned repeatedly about pervasive phone scams. Do not fall victim by giving out personal information over the phone, even if the caller seems legitimate. Take a phone number, then contact the IRS on your own or have your tax preparer check with the IRS on your behalf.

3. Be wary of phishing scams.

Emails claiming to come from the IRS and requesting personal information likely are fraudulent. The IRS typically initiates contact with taxpayers via U.S. mail. If you receive an email alleging that it comes from the IRS, don't click the link. Call the IRS and verify the communication yourself, or have your tax preparer check on your behalf.

Related: How You Can Better Protect Your Privacy

4. Check your credit.

Review your credit report at least once a year. There are many sites that promise to give you a credit report, but www.annualcreditreport.com is the only site authorized by federal law that provides a free report annually.

5. Protect your electronic information.

If you do your taxes online, make sure your home computers have security software, with firewalls and other protections, that updates regularly. Use strong passwords and change them regularly. Resist the urge to use a public computer or public Wi-Fi when dealing with sensitive personal data.

If you fear that your personal information has been compromised, the first step to take is to submit an identity theft affidavit. By submitting this affidavit, also known as Form 14039, you'll be helping the IRS mark your account to identify questionable activity. This is a good choice if your personal information, such as your Social Security number and birthdate, has been revealed as part of a data breach.

The next step will be to request a fraud alert, which lasts 90 days. An alert allows creditors to access your credit report only if they can verify your identity. The alert is a free service. Once you've placed one, you are entitled to a free credit report from each of the three credit reporting companies. Review your reports and, if you see issues, contact the businesses where the fraud has taken place. Then follow up with a letter sent by certified mail, in line with the Federal Trade Commission's advice.

If you know your personal information has been compromised, see if you are eligible for an Identity Protection PIN (IP PIN). The IRS has limits on who can obtain an IP PIN, according to specific criteria. For example, you must have received an IP PIN in the past, or received IRS notice CP01A or CP01F or filed your last tax return as a resident of Florida, Georgia or Washington, D.C.

If you cannot receive an IP PIN, submit an Identity Theft Affidavit. The IRS recommends that you then file a police report, or an FTC complaint or contact one of the three credit bureaus, as well as contact your bank to close any and all accounts.

Don't forget that your tax preparer can assist you, if you do become a victim of identity theft. Your preparer should be able to provide you with copies of your past tax returns to help you prove your identity, as well as help you manage any IRS correspondence and work with you through this long and sometimes difficult process.

Related: These High-Tech Jeans Protect You From Wireless Identity Theft and Credit Card Fraud

John Hewitt

Founder and CEO of Liberty Tax Service

John Hewitt is founder and CEO of Virginia Beach, Va.-based Liberty Tax Service, a tax preparation franchise firm. He also founded Jackson Hewitt and is a former H&R Block regional director. 


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