The under $600 no tax is so deceitful, it is scary that it's allowed. The reality of the under $600 (and I think the actual is really $599.99 or less) is an annual running total, NOT an single seperate win. If you won $300 a week for 10 weeks, the IRS will eventually notice you had an extra $3,000 and the IRS will want to know where their cut is.
A good example is a coworker of mine who is now saving up and collecting all of his non-winning tickets to offset his wins. The reason? The IRS noticed him showing up to collect thousands at a time. Well, here in GA, $2,500 and less and GA doesn't withhold taxes, however, they do collect your social security number and report it as income to you. An example of his wins is in one week alone, he won over $13,000 (and yes, I saw the tickets). I think that this year alone, he has won more then 3 times his annual salary. Now, I have no idea how much he spends, I know I couldn't keep up with it or I would have him betting for me as well.
Now, personally, I think what folks do with their hard earned money is their own business. But I do believe that folks need to be better educated as to the consequences of what happens when bending the rules finally catch up to you. If you want a better idea, go buy the latest edition of the Wall Street Journal. There is almost always a story of a Federal Court Ruling regarding the IRS. And over 99% of the time, it is in the IRS's favor. Now don't get me wrong, I don't hate the IRS. I have seen many occasions where the IRS has bent over backwards to work with people who made honest mistakes. I even envy the idea of having the problem of having so much extra income that I would actually have to pay additional money to the IRS (remember, the more you make, the more they take rule). There is even a rule that can be enforced to collect taxes on "illegal" income (that is how some of the drug cartels are being takened out, compliments of the IRS).
And in regards to the "someone is watching", your a fool to think someone isn't. Especially when it comes to money, somebody is always watching. And eventually, it will catch up with you. Personally, I think that if the major online gambling companies registered with the IRS and agreed to report the wins (and loss's) to the IRS of each individual, this anti-gambling would vanish in a heart beat. So those of you who like to play online, I suggest you get yourself an off-shore, non-US bank account. Then, when you have hit it big time, move out of the country, before the IRS catches up with you.
Take care and have fun all,
Sir Metro