The US military retirement benefits that do not qualify for the Bailey Settlement may still show as taxable after your federal "Wages & Income" Form 1099R entries. You will need to continue in your NC state interview. You will indicate you are a veteran and in the "Income" section you will find the US Uniformed Services Retirement Benefits" topic. There you will have the opportunity to enter the amount of the 1099-R distribution for military retirement benefits to exclude from NC taxable income.
Here is the NC reference.
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