1. You are correct. The most you could deduct using gambling losses would be $20 since all you won was $20.
You can only count as much in losses as you won. So if you spent $100 on lottery tickets and won $75, you can only deduct $75. The other $25 is just part of the price of playing the game.
But make sure that this deduction, along with your other itemizations, is more than the standard amount. You always want to use the method that will provide you a bigger deduction.
Even thought technically you might be able to avoid taxes on $3,000 you won by claiming $3,000 in bad bets, that's still less than the standard deduction of $5,700 allowed a single taxpayer on 2009 returns. If you have no other deductions to itemize, it doesn't make sense to forfeit the standard deduction's other $2,700 just because you can claimgambling losses. If, however, your wagering losses are large enough tohelp boost your already substantial itemized deductions, then fill out the Schedule A.
2. The IRS works on a "pay-as you-go" system. Even though people don't realize it.....they don't just pay taxes one day a yr. They pay taxes all-yr round. That is why at work your employer usually withholds payroll taxes from your paycheck each time. The estimated schedule due dates are April 15th, June 15th, September 15th, and December 15th.