Summary: Nonwage income, which is derived from such sources as pensions, self-employment, dividends, and capital gains, has grown significantly since 1970, when it accounted for just 16.7 percent of total taxpayer income. For tax year 1992, nonwage income has risen to 23.4 percent of the $3,665 billion in total taxpayer income. Pension income--at about $186 billion--was by far the largest and fastest growing source of nonwage income. Internal Revenue Service data show that taxpayers earning most of their income from nonwage sources are more likely to have problems paying their taxes than are wage earners and, as a result, owe more delinquent taxes than do wage earners. IRS' inventory of tax debt for individual taxpayers at the end of 1993 totaled nearly $80 billion, of which $58.5 billion was owed by taxpayers with primarily nonwage income. IRS data show that self-employment income was the largest share of nonwage income included in IRS' inventory of tax debts at the end of fiscal year 1993. Options for improving the timely payment of taxes of nonwage income include withholding income taxes on more sources of nonwage income, increasing taxpayer awareness of their tax payment responsibilities, and modifying the estimated tax payment system.
