Did you put a little money down on March Madness this week? You weren't alone. As the tournament approached, millions of Americans chose, and bet on, their favorite to take home the NCAA title this year.

Many were just friendly wagers -- a dollar in the office pool or a good-natured bet with the neighbor.

But other college hoops fans took the game more seriously and handed over big bucks to bookmakers, both legal and not-so-legal. All these March Madness wagers spotlight a persistent Internal Revenue Service problem: tracking and taxing gambling winnings.

It's a challenge the agency faces daily, because many people don't realize that gambling winnings are taxable. Of those who do, a good portion simply choose to ignore the law.

Admittedly, the IRS is playing catch-up here. While the U.S. income tax is a 19th century creation, gambling has been around at least since man was able to record his activities. Dice almost identical to those used on today's gaming tables have been recovered from Egyptian tombs, and the Chinese, Japanese, Greeks and Romans all were known to play games of chance as early as 2300 B.C.

Nowadays, in addition to the well-publicized offerings of Las Vegas, Reno and Atlantic City, betting is commonplace throughout the United States. The choices range from off-track betting parlors to tribal bingo games to riverboat casinos to state-operated lotteries.

Online gambling down, but not out
Then there's online gaming. A June 1999 Washington Post article reported "at least 140 Web sites now offer some form of wagering to online users -- an expansion in recent years that has alarmed opponents and put increased focus on the laws that govern Internet gambling." By 2005, research firm Christiansen Capital Advisors estimated that nearly 23 million people gambled on the Internet, with approximately 8 million of those gamblers from the United States.

It's easy to see why the numbers have grown so much. Type "online gambling" into any Internet search engine and within seconds you'll have a list of hundreds of thousands of potential gambling sites. This is in spite of the Unlawful Internet Gambling Enforcement Act, which was passed without much fanfare and signed into law in late 2006 in an effort to restrict U.S. gamblers' access to these typically foreign-based Web sites. It is now a federal crime for U.S. banks and credit card companies to process Internet-bet payments.

But even before the law was enacted, U.S. law enforcement officials argued that Internet gambling was illegal under the 1961 Wire Act. In recent years, many credit card issuers already had halted such transactions, citing risk factors if the cardholder disputes or refuses to pay the charges.

The latest antigambling law and associated enforcement efforts are getting mixed reviews and equally mixed results.

Some companies have curtailed their U.S. betting operations. Following the arrest in July 2006 of its CEO, the once ubiquitous BetOnSports.com halted its U.S. operation, which accounted for around three-quarters of its business, closing offices in Costa Rica and Antigua, which was the base of its American service. Other legal troubles subsequently shut down the entire company.