How does the IRS know how often I hold garage sales or sell items online?

the IRS will not know unless a person calls and reports you. we have these cases all the time. the former employee or former girlfriend 'blows the whistle'. this 'call' exposes all your taxes to review.  ed dimon, esq. 

When you sell personal items, there is a taxable event; however, it generally does not cause taxation.  Anytime you have a sale you take the sales price minus the basis to determine your gain or loss on the sale.  If you have a gain, you must pay taxes on the gain.  Normally, the sale of personal items results in a loss. Losses on sale of personal items  are not deductible.  You do not pay taxes on the sales proceeds.  You only pay taxes on gains.  Basis equals the amount you initially paid for the item.  Since most personal items decline in value, when you sell the item  at a garage sale or at a flea market, the amount you sell it for is less than the amount you paid for it resulting in a nondeductible personal loss.