How does the irs know if you sell gold?

Form 1099-B for reporting precious metals transactions to the IRS, including Gold IRA accounts. The 1099 series is a set of forms used to report profits earned by non-corporate salespeople. They allow the IRS to prevent many cases of tax evasion. These pieces include, among others, gold coins with fractional denominations; American Eagle gold or silver coins; any piece of foreign currency that has not been explicitly mentioned in the IRS's list of reportable items, as well as pieces of U.S.currency that were created after the list was created in the 1980s.

Don't fund your precious metals IRA with fractionated gold or silver, as they are also unnecessarily expensive.