There are three possible ways the information could be reported on your tax return, depending on the details of the games and your contract with WorldWinner.
1) In spite of the fact that they say they're not a gambling site, it could be considered gambling income. In that case, your net winnings should be what is reported to the IRS (incorporated on the miscellaneous income line), and the entry fees not associated with your winnings could be deducted as a miscellaneous itemized deduction not
subject to the 2% limit on Schedule A line 28, up to the amount of winnings. "Gambling lossses" cannot exceed gambling income, but any expenses other than entry fees might be deductible on Schedule A line 23.
2) If it's a hobby for you, then the then the net winnings, again, would be reported on the miscellaneous income line, and the "additional entry fees" would be deductible as miscellaneous itemized deductions subject
to the 2% limit, on Schedule A line 23. Expenses cannot exceed income for a hobby.
3) If it's considered a business, then it would be reported on Schedule C line 1, and possibly on Schedule SE for self-employment income. It doesn't really matter whether the net or gross amount is reported on line 1, because the entry fees could be deducted as expenses on Schedule C line 27. (If also considered "gambling", the entry fees could only be deducted to the extent of income.)
Unfortunately, in cases (1) or (2), the deductions wouldn't help you unless you have other itemized deductions.
Edited by Arthur Rubin on 5/2/2010 at 4:09 PM EST