There's no guesswork in taxes. If you work, you have to pay them and file a return every year. A few simple steps will help you make sure you're filing correctly and on time.

What are income tax returns?

Every April 15, most of us are required to file income tax returns. Tax returns are signed documents, mailed or submitted electronically to the Internal Revenue Service (IRS), where you declare your income and deductions and calculate your tax bill for the prior calendar year. If your home state has income tax, you have to file similar documents with your state, too.

Even if you pay a tax professional to prepare your tax return, you'll need to have everything in order so the right information is reported. Don’t wait until the last minute to gather your documents or see a tax professional — it’s a good idea to start preparing your taxes as soon as you have all your documents in hand and to think about your taxes throughout the year.

Why do you file income tax returns?

Tax returns are the time when you and the IRS square up for the year. You fill out the forms and figure out your tax bill. Depending on how much tax you have withheld from your paychecks, or pay through quarterly estimated tax payments, you might either overpay or underpay taxes over the course of the year.

If your total tax liability is more than what you’ve already paid, then you will need to send the IRS a payment, which is usually done electronically these days. If you’ve paid too much, you will receive a tax refund. So that's an obvious reason to file a return: to get any refund you're eligible for or pay any taxes due.

Another reason for filing is that many people are eligible for tax credits that reduce the amount of tax they owe. You'll only discover these and be able to claim them if you file a tax return.

A less obvious reason to file a return is that it starts the clock running for the IRS to question your tax bill for that year. Once you file a tax return, the IRS typically has only three years to come back to you and question your income, deductions or anything else (longer if you underpay by a lot, but that's less common). If you don't file, that clock never starts running.

How to prepare for filing taxes

Here are a few steps to get ready for filing your taxes:

1. Find a copy of last year’s return.

Your past year's return is the best refresher on all the different income and deductions that you may have and the figures you'll need to get together for this year. There may be things like interest deductions that you forgot about.

2. Gather your income documents. 

Gather all the official forms you receive in the mail or electronically that show your sources of income. If you have a savings or non-retirement investment account, you need to report items like interest or dividends earned. Most of these are mailed or available in January, with some arriving a bit later. The most common ones, with examples of why you'd get them, are:

• W-2: Salary or wage income from a job usually sent to you by your employer in January of every year.

• 1099-INT: Interest received from a bank or brokerage account

• 1099-DIV: Dividends received from a mutual fund or investments you hold in a brokerage account

• 1099-MISCI: Income for work done as an independent contractor

• 1099-B: Proceeds from stock or mutual fund sales and, starting in 2011, cost basis (purchase price) for certain investments

• 1099-R: Withdrawals from a retirement account such as an IRA or 401(k), including rollovers to other accounts

If any forms are missing or incorrect, contact the payer as soon as possible to have a new one sent to you. It's essential that the numbers on your tax return match the ones reported on these forms exactly, because the IRS gets a copy of each and checks your tax return for accuracy.

3. Gather any documents for deductions you plan to itemize.

In addition to your income documents, there are other documents you’ll need to gather if you plan to itemize deductions. This may include:

• Charitable donation receipts

If you made charitable donations to qualified 501(c)(3) nonprofit organizations, save your receipts. If you made donations less than $250, you can use a bank statement, a returned check or a letter from the nonprofit as a statement of your donation.

• Property tax payments and mortgage interest payments

If you paid any property taxes, look for form 1098 to arrive by mail or e-mail in January or early in the new year. It will document any interest you paid on a mortgage.

• Credits for home improvements or energy-efficient upgrades

Save any documents or receipts associated with special home improvement credits, such as energy-efficient appliances you bought for your home.

• Retirement and health saving account contribution statements

Contributions to Individual Retirement Arrangements (IRAs), Health Savings Accounts (HSAs) or self-employed retirement plans may be deductible. Save any statements you receive about contributions made. In January or early in the new year, you should receive a year-end statement by mail or email.

• Medical bills for large expenses

If you had large medical expenses, save all your receipts and also any documentation of the health insurance premiums you paid.

• Childcare expenses

If you paid for childcare, save documentation of your expenses and documentation of whom you paid the expenses to. This may not qualify for a tax benefit, but it’s good to have a record of it, just in case.

• Tuition paid

Certain types of tuition qualify for tax benefits. If you paid tuition, save your receipts.

• Student loan interest payments

If you paid any interest on student loans, that may be tax-deductible. In January or early in the year, look for form 1098 to arrive either by mail or by email, which will track any interest you paid on mortgage or student loans during the year.

• Estimated taxes paid

If you did not have taxes deducted from your paycheck and you instead paid quarterly estimated taxes, tally the amount of taxes you paid that year. You’ll need this number to estimate next year’s taxes and know how much you already paid.

• State taxes paid

If you paid state taxes the past year, track any state income tax you paid, including when you filed the previous year’s tax returns. If you had a state income tax refund, you’ll receive a form 1099-G which reports your refund. You may need this document if you itemize your deductions.

These are all common deductions, though most people don’t have them all. If you are taking itemized deductions, we recommend you work with a tax professional to make sure you are filing correctly.

How to file your income tax return

When you’re ready to file taxes or request an extension, there are different ways to file:

Go free online.

If you only have something basic like a W-2 form and one or two other items to report, consider using one of the many online sites that allow for free filing. Even if you have a bit more than that, check out the IRS free file and see if it will work for you.

• IRS Free File: www.irs.gov/efile/article/0,,id=118986,00.html

Use one of the fee-based tax-prep software programs or websites.

If you want to file using software or file online, we recommend:

• TurboTax: turbotax.intuit.com
• TaxAct: www.taxact.com

Each of these services will ask you to answer a few simple questions and will pick up all the income, deductions and credits you need to file your taxes. This can be a good option if you're not sure whether you've gotten everything.

File on paper, by mail.

If you want to file your taxes on paper, you can download necessary forms from www.IRS.gov. It's free, although it can take a lot of time to do properly. If you live in a state that has income tax, also check your state’s website for any state forms you may need.

Work with a tax professional. 

If your taxes are complicated, consider getting help from a tax professional. They can save you time and headache, which is a worthwhile investment.

Words to know

Unsure about something you read? Many of the financial terms you came across in this article are defined in our financial glossary. A-Z Glossary

Links we like

Here are a couple online features you might find useful:

• Internal Revenue Service e-File: www.irs.gov/efile

• TurboTax: turbotax.intuit.com

• TaxAct: www.taxact.com