won’t people just go to foreign based exchanges which might not share their data with the IRS?
The problem arises when you need to convert the asset into U.S. dollars to make it useful for you here in the U.S. If you bought $5,000 worth of Bitcoin and it’s now worth $1 million, there are no tax implications as long as you just hold onto it. But as soon as you convert the Bitcoin back to U.S. dollars it’s going to show up as a transaction the IRS can trace.
“won’t people just go to foreign based exchanges which might not share their data with the IRS?”
The average person will get caught. However, organizations like, say, the Mafia, will have a sophisticated system to get around any surveillance. Or, the Mafia may actually own the company doing the transactions, thus erasing their own as they go. Another possibility is an organization can own, say, a credit card company or bank so that the transacted amount shows up as a credit in their account and is therefore automatically converted into dollars when the money is transferred into another account. The IRS really only goes after the little guys because it’s the little guys they can catch. (The Nazis bribed comparatively low level employees in Swiss banks to find and empty Jewish owned bank accounts. Low level employees can do amazing things because it is always assumed by those above that said employees are following the rules. And, low level employees are comparatively cheap to acquire.)
People will but still have the issue of reporting any dollars when they want to use the money in the U.S. (overseas purchases kept overseas are harder for the IRS to identify).
The smarter and more capable individuals will follows those that set up overseas corporations. The really smart ones will set up scam foundations like the Clinton Foundation or the Gates Foundations and have overseas "donations" to their foundations.
The IRS is not going after these people for taxes, they're going after these people because the Globalists don't welcome cryptocurrency users to the game that these Globalists have been running for decades.