Exactly this. In particular, the IRS does not/likely does not have knowledge of a range of taxable income that we are bound to self-report: sales of goods and p

Exactly this. In particular, the IRS does not/likely does not have knowledge of a range of taxable income that we are bound to self-report: sales of goods and property, cash tips or payments, small consulting projects, rent you earned renting out a room, etc. The deductions side is even more opaque to the IRS, for example they have no idea how far you commuted to your job, or that you cared for a sick parent, or that you made tax-saving energy-saving improvements to your home. The system is essentially an honor system with a barb for those who get caught cheating.