Solved
I've left the state tax withheld boxes blank as instructed.
Well it could be other income too that is causing the problem.
BUT...on the page following the main 1099-R enter.
1) Select the "Bailey settlement...."
and
2) The NC distribution amount must be the same as box 2a ...(or the Federally taxable amount of box 1 if box 2a is empty) The NC distribution is not blank or zero. The software uses that number to subtract from Federal gross to create NC gross.
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