Go back to the "Income" tab and "Edit" the 1099R. After confirming the form entries there will be a follow on question for NC residents that asks if the distribution is part of the Bailey Settlement. You would need to select "Yes."
After completing the Federal Interview return to the NC state interview. Click through the initial pages and you will arrive at the page titled "Here's the income NC handles differently." The Bailey deduction should show at the top of that page with a button allowing you to edit if needed.
And, when you get to that page, do NOT leave the NC distribution amount empty. It should be the value of box 2a, (or the taxable amount of box 1 if box 2a is empty or undetermined).
Once the Bailey Settlement is selected on that page following the main forms entries, NC uses the NC distribution amount as what it subtracts from the full Federal AGI that was transferred into the NC tax form. if you leave the NC distribution amount blank or with a zero...then nothing is subtracted from NC income.
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