At the "dummy level" (which is somewhat where I am myself), for federal taxes...
Casual gambler reports ALL winnings and losses, as required. Doesn't matter if your win generates a W2G, it is reportable. Doesn't matter if you consider yourself to be a gambler at all, e.g., if you buy an occ. lottery ticket, IRS says you're gambling and should report wins & losses.
The W2Gs are the IRS way of checking up on those who "cheat" by NOT reporting as required, the "trigger amount" to generate a W2G is the threshhold where they say, we're checking on you. Same with W2's and 1099's -- it's just another way for the IRS to check up on you, but even without all these forms, taxpayers are expected (voluntarily and at their own expense) to keep complete records and report all income (IRS does define "income" pretty comprehensively).
If using "session" method of record-keeping, which is what most use, the wins and losses are EACH calculated based on how you did overall for a given session. Definition of "session" is apparently not very exact, but it seems to be acceptable to use "door to door" method -- report what you won/lost total from the time you entered the casino until you left it. This is NOT a "trip" total unless you never left the casino during your entire trip, and even then, I think IRS would consider going to sleep in your room for a night to end a session.
"Session" is certainly longer than a single play / pull on a machine, or short series of plays on one machine that might be followed in the same visit by play on another machine, unless that's all you did that day. I don't think it's clear whether one "session" ends when you finish playing VP and another starts when you go to play blackjack or poker. Personally, I total my poker for the day, the VP for the day, etc., and call each game a "session" for that day.
At tax time, take your log, add your winning sessions, add your losing sessions, report both totals, deduct the losses from the winnings. If you won more than you lost, pay tax on the win. If you lost more than you won, you can't use the excess loss to offset other income (that's where "professional gamblers" start to benefit). In other words, losses are deductable ONLY up to the amount of your winnings.
The IRS apparently has difficulty understanding how you can have a "session" with a loss, or with a win less than the W2G, if you get a W2G during a session. Some people therefore falsify their records (and some disagree that this is what is being done) by adjusting their session results to show a win of at least the W2G, and put the loss in another session. While the IRS probably wouldn't care at all if you did this, since the tax comes out the same, it can cost you money in some states, depending on how they tax you.
The IRS will come after you if they suspect you are not reporting income. It is my understanding that they don't care if you don't report all your losses or other deductions 
They WILL let you know, no matter who benefits, if you make a math mistake on your return.
It is my understanding that if they can prove (in court) that you didn't report income and KNEW it, that is tax fraud, a criminal offense (consult your personal tax and criminal attorneys for legal advice, I'm not a lawyer). I'm also not an accountant, but most of what I've written is in IRS regs or tax booklet / form instructions intended for public reading & understanding (except the "session" stuff, which I've mostly gotten from this list).
Your accountant SHOULD be able to guide you through this, although some seemingly have never dealt with any issue related to gambling income. Jean Scott's book is a great help, esp. if you do your own taxes.
--BG
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1.2. Re: 1099's
Date: Thu Feb 11, 2010 5:01 pm ((PST))To dummy this down for this dummy!....
Casual gambler...reports W2G winnings as required.
Are you allowed to deduct for the entire year's losses in that case? I.e.,
got a hit for $10,000 on a machine...did take most home...but promptly lost
ALL if not more on subsequent trips throughout the year.I've been figuring that my records show I've taken at least that much out of
the bank (on days to coincide with my trips)Is that "ok"??