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MarkOYoung: This isn't like I am intentionally over-withholding my state income taxes to try to use it to further decrease my federal taxes, which I think is where my tax preparer got bit by penalties, but I'll have to ask more about this when I meet with her this Friday.

If you over-withhold your state income taxes for 2004 and deduct the withheld amount on your Federal tax return for 2004, you'll also have to claim the state tax refund as taxable income in 2005.
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