At Nevada's legal sports books, bets are placed on the NCAA tournament not only by filling out the popular brackets but also on the outcome of each game. You also can place "prop," or proposition wagers, on such things as who will sink the first and last shots or foul out first. Essentially, if it happens (or could happen) in a game, the Nevada sports-book operation will take a bet on it. And because the tournament goes on for weeks, bettors have many more ways to drop some money on a game or games.

The tax man has a way to track legal athletic wagering. It's a dicier tax-collection proposition, however, when it comes to bets placed at increasingly popular offshore sports-betting operations, dollars dropped into friendly office pools and illegal wagers handled by bookies. These bets, according to the American Gaming Association, represent more than 99 percent of all sports betting nationwide. The National Gambling Impact Study Commission estimates that translates to as much as $380 billion annually in illegal wagers.

For whom the tax bells toll

In some cases, Uncle Sam even gets his cut (25 percent on most winnings) before you get your payout. That's the case for winnings of more than $5,000 from any sweepstakes, wagering pool or lottery; withholding also is collected on proceeds that are 300 times or more the amount of the bet. Gambling winnings from bingo, keno and the slots are not generally subject to withholding, but you're still required to provide your tax ID. If you refuse, the casino can assess backup withholding of your jackpot at a 28-percent rate.

Last year, the IRS also started getting reports from poker tournament sponsors when tournament winnings exceeded $5,000. The reporting requirement, aimed at poker tournament sponsors, including casinos, helps the IRS ensure that card-game winners are including their winnings on their annual tax returns.

Those poker tourney winnings, along with your jackpots from the casino or horse track or lottery dealer, will be recorded on Form W-2G showing how much you won and how much, if any, was withheld for federal taxes. And like all other income reporting forms, a copy will go to the IRS.

But there's a distinction between what's reportable and what's taxable.

All gambling winnings -- regardless of the amount -- are taxable. But it's ultimately the winner's responsibility to let the IRS know how much was won, even if the casino doesn't have to file a W-2G. This reliance on the gambler's tax-law compliance is where the IRS frequently gets shortchanged.

How tempting is it to assume the IRS won't miss a small jackpot? Apparently pretty darn appealing.

"On a trip to Vegas, I won $146 at a slot machine," admits a chagrined economics professor at a church-financed university, "and I didn't report it on my tax return."

Making a bad day at the track pay off

IRS analysis of 2006 returns, the latest year for which data are complete, shows almost 1.9 million taxpayers reported almost $28 billion in gambling income. This includes winnings from casinos and horse tracks, lottery and raffle jackpots, as well as the fair market value of cars, houses and other noncash prizes.

As for how many taxpayers didn't bare all about their betting at tax time, the IRS won't even venture a guess. "We can't tell you what we don't know," says an IRS spokesman.

But the IRS has a tax break for conscientious taxpayers who report their gambling income on line 21 of their Form 1040. They can subtract any gambling losses from winnings if they itemize. For many, that's a good deal. That same 2006 data shows that more than 1 million gamblers that tax year made their good luck less taxing by claiming slightly more than $19 billion in bad bets.

Losses to reduce gambling winnings don't have to be from the same game. If you go to the race track every weekend and drop $1,000 but then win $3,000 on the World Series, those losing horse betting slips can reduce the amount of baseball winnings on which you'll owe tax.

There are a couple of ground rules to keep in mind here. First, you can't claim more in losses than you won. And, as with any tax deduction, you need to keep records of your losses that will satisfy the IRS if you're ever audited.

Good records are the best bet

Such reconstruction efforts not only are difficult, they aren't likely to pass IRS scrutiny. Tax professionals recall a horse race fanatic who went to tax court with bags full of losing betting slips to support his large deduction against his winnings.

It didn't work; almost every ticket was covered with footsteps of the other bettors who tossed the tickets when their horses didn't win. He ended up paying the extra tax -- and penalties.

"It's not a tax myth, but it is an old story," says Roberts, who saw similar actions when he worked for the tax office in Saratoga, N.Y.

"And if you don't have a big win to offset," he adds, "then the receipts can be your ticket to Gamblers Anonymous."