Steve,
You’re correct in many respects. However, I’m going to say the following to US tax payors:
1) generally when they audit one year, they audit 2 to 3 years
2) generally they audit the past returns until they get to the present tax returns
3) this is not legal, but neither is online gambling funding or site: remember, the government is out to put you out of business and if you like to give the government money that they are NOT entitled to (read your affilate/gambling terms) and help them put you out of business, then by all means give them your affilate/gambling money!