The IRS gets a copy of the 1099-B that you get. They don't know whether you had a gain or loss until you tell them by entering the cost information on your tax return. The IRS does check to see if you report stock sales. If you don't, then they assume that the entire proceeds was a short term capital gain and they will send you a bill for the tax on the entire proceeds amount, and they will include penalties and interest. If you do not report the sale, then expect a letter from the IRS in just under a year from when you file.
