Federal income taxes withheld are reported to the IRS by the withholding person or entity.u00a0 You as the taxpayer may be required to file income taxes to report your earnings to the IRS.The IRS is reported your income earned or unearned through various forms in addition to any taxes withheld.u00a0 Let's say you work for a company as an employee then the company reports your income and any withholding's on a W-2.u00a0 If you are an independent contractor, a company would report your income through a 1099-MISC.u00a0 If you have a business with credit card transactions, then the credit card company sends the IRS a 1099-K.u00a0 Interest and dividends are reported through a 1099-INT and 1099-DIV.u00a0 Sale of you home is reported on 1099-S, and so on and so on.So the IRS knows that you have income.u00a0 They look to see if you have filed a tax return (which may be required depending on your status and income, for example if you file single and earn over $10,300 then you are required to file).u00a0 The IRS will receive information on any taxes that have been withheld.u00a0 If the taxes withheld are not enough to cover the taxes due then the IRS will send you an letter informing you that you will need to pay the additional taxes, with penalties (for not filing and not paying on time), in addition to interest.u00a0 Some individuals that earn less than the filing threshold may want to file because you might actually receive a refund if taxes have been over withheld or may qualify for a credit.u00a0u00a0