Income taxes are due as soon as you begin receiving benefits. You may have taxes withheld by the ERS, and then you would file once per year, as most active employees do. You may choose to have no taxes withheld, but you are then required to file estimated taxes quarterly, and may owe the government a penalty if you do not pay sufficient taxes on time. You may be entitled to a monthly tax exclusion on part of your annuity for contributions that were taxed (contributions paid before January 1, 1984). The ERS calculates this amount, and our custodian bank records it on your 1099R Income Tax Statement issued each year.