When a corporation confers an economic benefit upon a shareholder, in his capacity as such, without an expectation of reimbursement, that economic benefit becomes a constructive dividend, taxable as such. See INTERNAL REVENUE SERVICE NATIONAL OFFICE FIELD SERVICE ADVICE MEMORANDUM FOR DISTRICT COUNSEL, Number 200011003 dated October 27, 1999; specifically Page 4, 3rd paragraph.
The 16th Amendment to the Constitution granted authority for Congress to assess income taxes. It is promulgated via the Internal Revenue Code. In addition, state governments (42 of them) assess an income tax too. For the IRS, Form 1040 is filed to report and calculate the associated income tax for individuals.
It is important for the bookkeeper to track income taxes for the business and the owners. Tracking includes apprising management of current status and pending obligations. In addition, the bookkeeper must make sure the payments are made to the correct authority for the proper amount and assigned to the appropriate federal identification number.
The American Benefits Council estimates that about 80% of all American workers have access to an employer sponsored retirement plan. This means that 20% of the workforce has no access to a formal retirement plan. To alleviate this issue, Congress created laws allowing those with earned income access to a retirement via Individual Retirement Accounts or more commonly called IRA’s.