When it comes to taxes, the Internal Revenue Service has ruled that bitcoins and other "convertible virtual currencies" are "treated as property" and not treated as currency. This concise guidance from the IRS has implications for how bitcoins are taxed, what information is needed to make sure taxes are calculated correctly, and what tax planning techniques people can use to minimize their taxes on Bitcoin transactions.  In brief,

Virtual currencies are property for tax purposes;
That means, you'll have capital gain or loss when disposing of virtual currency;
Income is taxable, even if you are paid in virtual currency;
Spending virtual currency is really two transactions in one: disposing of the virtual currency and spending the dollar-equivalent amount;
Business transactions in bitcoin are subject to all the normal rules for sales tax, withholding, and information reporting;
Keeping detailed records of transactions in virtual currency ensures that income is measured accurately.