What if you get paid in meat, $100k worth of meat, but then you spoil all of them so they're now worth $0. It's not government's problem if your currency is volatile. You can find a job that doesn't pay you in BTC.
The problem there is that meat doesn't come in dollars; it comes in kilograms.
If you are paid in meat, you get something like 100 kg of pre-formed frozen ground beef patties. That doesn't have a dollar value unless you can find a buyer for it. Which is pretty easy to do if it's a commodity.
So let's try a more broken example. You get paid in sandstone triangular prisms machined to be 31 mm on the two longer sides, 19 mm on the short side, and 9mm in height. These then have a square(-ish) hole drilled in them, slightly off center, and then the sides are grooved, and the faces engraved. These triangles are called fubaar.
Fubaar have no fixed exchange rate with the dollar. For a job, you are paid 1000 fubaar. The value of a fubaar is very stable. One has been able to purchase the traditional formal attire of Barbazia for exactly 5 fubaar, for over 800 years. But you can't buy much with them on the international market except quuxfruit--which bruises easily, and smells like durian crossed with feet after four days.
At the end of the year, I could report that I earned 1000 fubaar since last year, and mail about 250 of them to the treasury. It's not my problem if the government can't convert them to dollars. They can go buy quuxfruit with it. But the treasury won't take anything but dollars. My only recourse is to say the fubaar represent $0 in income, because they really are essentially worth $0, having no inherent value.
The problem is that the gov't is levying taxes in dollars on income that is not dollars, and exporting the inconvenience of conversion to those least able to get a good conversion rate. Congress has the enumerated power to regulate the value of foreign coin. Why not use it? The Treasury also has the ability to accept foreign coin. For a good length of US history, much commerce was conducted in Spanish silver dollars, not US-minted coin. Those were acceptable for payment of taxes.
I think I follow what you're saying, you think the IRS should accept BTC as the tax payment, so it is at least always correlated to the asset you earned/lost.
While I agree, it's kind of backwards to ask for this now, after the IRS is finally making their moves/intentions clear. I know a majority of the crypto crowd was quietly hoping the IRS wouldn't keep track of the absurd money people were making, so this just feels like a reckoning.
That's just it. They require you to say how much it was worth when you got it.
But they really have no way to know whether you are lying. As a result, people lie about the value of traded goods, or art, or land properties, or unlisted financial instruments, to reduce the amount of income tax they purportedly owe. This is a major tax-evasion (not avoiding) and/or money-laundering loophole employed by the rich, especially when employing art and real estate, which may be justifiably non-comparable to similar goods due to uniqueness.
A law-obeying person would liquidate enough of the subjective-value goods to pay income tax at the maximum withholding rate at the time of receipt, and send that amount to the IRS at the end of the quarter, then claiming a refund from that amount with their return at the end of the year.
A practical, law-breaking person would just keep their mouth shut about it, and allow the IRS to claim it was income that had value, and only pay taxes on it (or dispute the amount demanded) if the IRS actually demanded an amount.
The enforcement on Bitcoin-holders is not to raise revenue in any meaningful sense. It is to discourage use of cryptocurrencies as a means of tax evasion--probably because middle-class people could make use of it. With respect to the means employed by the rich to evade and avoid taxes, an equivalent effort would likely return 1000 times greater rewards.