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RE: IRS Tax Rules for Cryptocurrency in 2018

Well the law exists and can be enforced, without crypto being practical. Widespread compliance is unlikely, but any individual person can be audited by the IRS. When the IRS does a personal audit of your taxes, they are going to ask for our documentation to support our tax filing. If we reported capital gains from crypto, then they're going to want to calculate the basis themselves... at which point we can show them our exchange accounts on bittrex and they can wade through the transactions and fair market values if they desire. Or the auditor themselves has the authority to reach an individual compromise with the person they are auditing.

Now, if you never disclose crypto earnings, the way a normal IRS auditor would catch it is they would be looking at your bank records. It depends on the type of audit, but they may ask for your checking account records to substantiate everything. If you got large sums of deposits from coinbase.com they're going to ask about it. From there they can figure out you have cryptocurrency capital gains or revenue.

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The IRS would make life so much easier on themselves and everyone else if they just taxed the crypto to fiat exchange. As it stands right now, that's how I plan on reporting.

I agree its the law and can be enforced. I was just suggesting that it's likely going to be some time before everyone can actually be compliant.