Good point. But I would argue that receiving payment in BTC makes it easier to illegally not declare the income. Now that you can pay for all kinds of products and services using BTC there's no need to convert it to another currency first. The only way to trace it would be if the employer filed a 1099, which they're still incentivized to do in order to write the payment off as a cost instead of profit.

What if you were to get paid in something really non-traditional, like goats.

i.e. - I build a fence for a farmer, and he gives me 7 goats.

What do I owe the IRS?

You are required to count the fair market value of the goats as income.

Hypothetically, what if you only bartered and never used 'money'? Would you be required to sell a goat or cow in order to get the cash to pay taxes? Would someone from the IRS just show up and take a goat to sell if you didn't pay?

Heh, good question. I've never thought about it. Looking on Wikipedia, it does appear that you'd have to come up with the money from somewhere:

http://en.wikipedia.org/wiki/Bartering#Tax_implications

In the US and the UK, income is income however earned in whatever currency or form transacted (i.e., whether cash, sex, goats, or blessings).

The IRS does not accept payment in goats. They could secure a court order requiring you to sell the goat, or allowing them to sell the goat to satisfy your tax liability (with the excess returned to you).

Good question for The Goat Spot:

http://www.thegoatspot.net/forum/

I almost can't believe Wikipedia has an article on this:

http://en.wikipedia.org/wiki/Taxation_of_illegal_income_in_t...

> The Internal Revenue Code is not a mechanism for enforcing other codes of law, such as criminal law. [2] A person’s taxable income will generally be subject to the same Federal income tax rules, regardless of whether the income was obtained legally or illegally.

Also, Yale Law has a PDF entitled "Taxing Income from Unlawful Activities" (1974):

http://digitalcommons.law.yale.edu/cgi/viewcontent.cgi?artic...

> When income from unlawful activities is reported, the taxpayer often supplies his name, address, and net income (usually in round figures, with such laconic labels as "miscellaneous income" or "income from various sources") and leaves the rest of the return blank.

The whole PDF is actually a very interesting historical study of the ins and outs of taxing ill-gotten gains.