There's no need to add code around specific keywords. If your content is relevant to the keywords and is filled with related keywords then Google will have no problem indexing your content for what it is.

So if im using All in One Seo for WP as long as I fill that out on my pages & post it should be good? Do I need to do anything for pictures?

The only reason to add a hyperlink inside the article on your site is for interlinking your pages.

Let's say you have a keyword on subpage1 that's relevant to subpage2. You use the keyword on subpage1 and hyperlink it to subpage2. This is a great way to get all of your pages indexed much quicker and the big G likes it

I would be careful when using exact keywords to interlink pages in your website. You don't need to give Google a blue print of what to look for.

Would you give the IRS more information then it needs? especially if you were being audited?

That said. Make your articles look natural.
If you are going to optimize it, never optimize it for more then 2 words (stick to 1 if possible).
Do not ever use meta keywords.
Do not ever use a keyword tag cloud.
Use your keyword in the meta description and title if possible.
Also, it is wise to use your keyword in the first paragraph of your article (1st sentence if possible). Past that, use different tenses of the keyword but don't use it more then 1% of your article - ever.
And again, back to interlinking - up to you, but I have not seen much benefit from my testing... it's a risk so as a company, we don't do it...