Is moving up this way okay?

[Pog0]

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Indeed. If you sell cocaine, you owe taxes on your profits. If you accept a bribe, you owe taxes on it. If you steal, you must report the fair market value of the stolen property.

Playing in an illegal cardroom is not necessarily illegal. Evading your taxes is.

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Sure you're supposed to report your winnings, however, when you cashout your online winnings, the money trail is visible. If you come across a wad of cash and stash it under your pillow, you're not going to get into any trouble.

I'm not sure what the balance between 'doing the right thing' and 'not risking getting caught' is for most poker players when it comes to paying taxes. In this situation, one would have to weigh heavily on the 'doing the right thing' side to report it.

Either spend it or hit up the bigger games. If you just sit on that money to avoid paying taxes on it, you'll just be hurting yourself by the time you could have invested it and legally built it bigger than it initially was.