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Anyone know of the tax benefits/pitfalls of paying (and being paid) in bitcoin?

It certainly makes tax evasion easier, if that counts. Not as easy as paying/being paid in cash, but far easier than other electronic means of payment (in the sense that it currently offers more anonymity).

It isn't legal in most US states. Almost all states have laws that dictate employees working within that state have to be paid in US currency

To cite one example, here's Texas:

http://www.statutes.legis.state.tx.us/Docs/LA/htm/LA.61.htm

And payroll taxes certainly need to be paid in US currency. The IRS and state tax departments don't accept Bitcoin.

They do, but it's classified as a "barter".

If you have the option to get USD instead of BTC, then you're much, much better off getting paid the former.

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