[CORed]

From a purely practical standpoint, it's almost impossible to collect online winnings without leaving a record somewhere. You are going to have to deposit money into your checking account, cash a check, make an ATM withdrawal, or something. Even though this is not directly reported to the IRS, if they audit you, they will find it.

In live games, you are paid in cash, and unless it's a large amount, it's not reported to the IRS. If you just spend the cash, and don't deposit it into a bank account, it's quite a bit harder for the IRS to prove that you have unreported income. Of course, if you make enough in live games, and you want to buy a car or other high price item, or invest the money, you're going to leave an audit trail, and it gets to be pretty difficult not to leave a trail that the IRS can find if they look for it. So, if you make more than a few thousand a year in cash games and want to do something with that money other than stuff your mattress with it, you're probably better off paying taxes.