How does identity theft work?

I mean aren’t things set up so that this shouldn’t be easy if not almost impossible? Aren’t there picture id’s and demands for multiple id’s and such? How do they do it and what can one do to stay protected? Should one subscribe to a id watch security team is this necessary? Please be specific or if you know of resources explaining this clearly.

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I recieved a phishing scam IM from a site claiming to be from Yahoo, which it obviously was not. I didnt give them any account information,however, I do want to show this site to Yahoo security team

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