For the information returns for different types of income, such as 1099-R and W-2, TurboTax will recognize an error if the state tax withheld is more than the state distribution.
In the situation you describe, see if you can make both the distribution and withholding entries on the same 1099-R screen in TurboTax. This should resolve the issue.
See this tax tips article for more information about Form 1099-R.
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