IRS Now Has a Tool to Unmask Bitcoin Tax Cheats

[Soros Shorts]

So if I pay cash for Bitcoins, and do the transaction over the free WiFi in McDonalds, how are they going to check on that?
If I buy them from a stranger, then the trail dies with me.

Each device as a unique imei number. It would only work if you use different devices and different IP's each time.
If you use the same device too many times and especially if that's used with the same IP, they are going to catch you sooner or later.

Your device doesn't leave imei trace in the blockchain, only in the McDonalds Wifi, so they'd have to issue a subpoena to get that from them. Doable, but what now?
You go to another restaurant and send a transaction. Now they have 2 transactions done from the same device. How do they link a device to a real person?
Let's say you continue doing that over and over from the same phone and all they have is different BTC addresses with the same IMEI and no ID and they've lost a lot of time and money on going through all those devices that used wifi in all those restaurants. That would be a disaster for them.

Furthermore, IMEI is not used in WiFi. IMEI is only applicable for wireless data that goes through wireless carriers. For WiFi it is the MAC address of your WiFi adapter that MacDonald's sees.

[marky89]

I'm not sure the IRS really needs to track all bitcoin transactions to find cheaters.  Couldn't they just subpoena the records from exchanges to see who is selling for US dollars?

Not too broadly, they can't. With Coinbase, the IRS tried to go on a fishing expedition, and the courts sided with customers, allowing them to file John Doe motions against the IRS actions. In response, the IRS is reportedly drastically scaling back the probe of more than a million customer accounts.

Further, this happened on a licensed, US-based exchange. The IRS presumably has less leverage with offshore exchanges. Apparently, after last month, that's where the DOJ et al come in, to take down unlicensed exchanges and seize their money...

I would not be surprised if in the near future the IRS requires exchanges to report buy and sells, at least the ones in the US.  

This is definitely going to be rolled out in the next year or two. Coinbase and Gemini will be issuing 1099-Bs to customers before you know it. The IRS doesn't want to miss out on this action any longer.