The Internal Revenue Service has one mission: to collect taxes.  Our personal income taxes in the United States are calculated in one of two ways.

Self-assessment:  This is the term used for your income tax return, Form 1040, 1040A or 1040EZ.  You list your sources and amounts of your income for the year.  You reduce this amount by certain allowable deductions and exemptions giving you your taxable income.  The amount of your income tax depends on your filing status (married, single, etc.) and certain alternative tax adjustments written into the tax code.  You mail your return to the Internal Revenue Service to tell them how much your tax should be.  Assuming you have properly reported and calculated your income and deductions your income tax liability for that year has been determined.

Substitute return: If you fail to file an income tax return which the IRS believes you should file they will prepare what is termed a "substitute return".  This return will be prepared from the third party reports the IRS receives from various sources.  These reports include your W2 from your employer and various 1099 information regarding interest, dividends, stock sales, etc.  This return assumes nothing and generally results in a tax which is higher than it should be.  For example, the IRS will assume you are single, that you have no dependents and no itemized deductions.  This may be so despite the report of your mortgage interest.  There are certain circumstances where your mortgage interest may not be deductible, so the IRS will not assume that it is.  Stock sales will be included as short term capital gains with no basis.  These assumptions will rarely be accurate and the tax calculated will exceed the amount you actually owe.  The only way to correct this tax calculation is to file your income tax return.

State Income Taxes: Most states use personal income taxes to generate revenue.  These taxes are usually calculated from certain amounts on your Federal income tax return with certain state specific adjustments.  Your Federal income tax return must be prepared to properly calculate your state income tax.