shadroch said:
At years end, you total up your winnings and then you total up your losses. You subtract the losses from the winnings and the remainder is taxable. You must itemize in order to deduct any losses, and you fill out a schedule form to deduct gambling losses.
Read this, and then re-read it.
(1) Gambling winnings are lumped in with regular income; winning $100 at the tables is no different from getting a $100 bonus from your employer.
(2) That some gambling winnings are withheld and others aren't (a common complaint) is irrelevant to your eventual tax liability. You can get a tax refund if you end up losing your winnings just as you can get a tax refund if you end up having a baby and getting extra deductions. Uncle Sam earns interest on your withholding - deal with it.
(3) That you file a CTR is irrelevant to your tax liability. If you buy in for $20,000 and cash out $10,000 you still have to file a CTR. As the name suggests, it's there to track cash, not to track winnings.
(4) Not reporting your gambling earnings is equivalent to lying about your income, and it's tax fraud. That people do it regularly (tips, for instance, are self-reported and generally assumed to be underreported) is irrelevant.
(5) Tax structure sucks for gambling because you can't roll over losses. So if you make a 3-day trip to Vegas over the New Year holiday, win big on December 31, and lose big on January 1, you pay taxes on what you won on December 31 even if the trip were even. However, don't use "I hate our tax structure" as an excuse to commit tax fraud - voice your concerns in November during voting season, not April during tax season.
(6) I have no ethical qualms about simply subtracting my (undocumented) losses from my (undocumented) wins and simply reporting the net as a win - that being said, I play for very small stakes compared to my non-gambling income and my net gambling wins are less than my bank interest, so if the IRS wants to chat with me that's the least of my worries. The proper thing to do is to document everything (use an Excel spreadsheet, print it out monthly, and sign it if you need to) and file the Schedule as shadroch pointed out. I consider this more of a moral issue than a legal one - it's up to your conscience/soul.