Huh, just as I get interested in Bitcoin (literally the last few weeks) I see all of this. My understanding is that using bitcoin is supposed to be basically a "anonymous" transaction. How the hell can the IRS tax these transactions? From what I've learned in my very limited education on the subject they really can't (or they won't invest HUGE time and $ to investigate unless you are a huge player). I'm sure that I'm just ignant here.

Maybe they really can't, but they are just throwing it out there to scare folks?