From Tomcruise [ QUOTE ]
Guys, get a grip, you will pay taxes on what you net, I've won lots playing live and online. I have an accountant, and all we do in april is figure out, roughly how much did i net?, ok can i roughly prove it?, fine. Then there is like one line on the tax for where i write , gambling winnings = 100k. End of story. chill out.
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Be careful. I'm pretty sure you can get hit pretty hard if audited. Unless you file as a professional gambler (which is often rejected by the IRS anyway), you are required to report the sum of all winning sessions (unfortunately, it's not 100% clear what constitutes a session) as gambling winnings. This amount is included in your Adjusted Gross Income (AGI). If you choose the itemize your deductions you can then include a deduction for gambling losses up to the amount of your winnings.
If you have 100k in non-gambling earnings, 100k in gambling winnings, and 80k in gambling losses, your AGI is NOT 120k ... it is 200k with an 80k deduction. These may seem like the same thing, but the higher AGI can influence eligibility for a number of other deductions, and could trigger the alternative minimum tax. You also lose the option to take the standard deduction.
Finally, if your records for losing sessions are incomplete or suspect, you may be hit with additional penalties.
Note: I am not a tax or legal expert ... just did some recent research on this issue.
I seem to have lost most of my links, but here are a few:
http://www.onlinepokerfaq.com/guide/us-taxes.html
http://www.taxabletalk.com/gambling/
http://www.casinogaming.com/features/taxlaws.html
http://www.markpilarski.com/column43-2.html