To what level is bitcoin monitored by the government?

I want to be clear, I am not trying to commit tax fraud.

I personally don’t plan on selling for 5+ years. But how would the government even audit this? If I never told them about my bitcoin and used bitcoin to buy a a brand new car, never converting it to fiat. Would I be committing tax fraud?

Who’s to say my bitcoin isn’t gambling winnings? Or better yet I sold other goods for my bitcoin at current market value.

If I buy bitcoin on cash-app or or exchanges does the government have any record of that? Who’s to say I didn’t just turnaround and sell it the next day to somebody?

To what extent is this just a trust system?

I know this sub does not like tax fraud, but isn’t the anonymity of bitcoin violated if the government is tracking our bitcoin transactions.