Federal Income Tax Benefits from the Retirement System receive special income tax treatment. However, since tax laws often change, the Retirement System cannot give you detailed tax advice concerning your retirement benefits. If you need more specific information with regard to how your retirement benefits are taxed, we would suggest that you consult the Internal Revenue Service, the North Carolina Department of Revenue, your attorney, or your accountant. You can reach the Internal Revenue Service and the North Carolina Department of Revenue at the following telephone numbers: 800-829-1040 (Internal Revenue Service) 877-252-3052 (North Carolina Department of Revenue) You may also contact your local branch of the North Carolina Department of Revenue. Part of your retirement benefit may not be subject to federal income tax because tax on certain contributions may have been withheld while you were working. Included in the non-taxable part of your retirement benefits are contributions made by you before your employer began to tax-shelter your contributions (July 1, 1982 for teachers and state employees) and any non-rollover service purchases made by you at any time. All or part of your retirement benefit is subject to federal income tax because it has not been taxed before. Included in the taxable part of your retirement benefit are contributions made by you after your employer began to tax-shelter your contributions, any rollover service purchases, and all benefits paid from the investment earnings and employer contributions. When you retire, you will receive a statement that shows the total amount of future retirement benefits that will not be subject to federal income tax. That figure will be referred to as your "federal tax base." Under federal law, the majority of each and every retirement check is includable as taxable income on your federal tax Form 1040. This does not mean that you will pay tax again on the contributions on which you have already paid tax. It does mean, however, that you may exclude only a small portion of your previously taxed contributions each month throughout a period of time specified by the federal government under a provision referred to as the "Simplified General Rule." Further details regarding the "Simplified General Rule" are located in the "Income Tax" section of the Your Retirement Benefits handbooks located on our Web site at www.myncretirement.com. You may elect to have federal and/or North Carolina income tax withheld or not withheld from your retirement benefit. Your election will remain in effect until you revoke it. You may change your election at any time during the year by completing a Form 290 (Choosing Income Tax Withholding Preferences). You may also change your election online by logging into your personal ORBIT account and following the insructions to change your tax withholding. An election or revocation received by the 10th of the month will be effective that month. If not received by the 10th, it will likely be effective the next month.