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No, your state refund is not being used to pay part of your federal tax. The program is just netting the two for information purposes. You will need to pay your federal tax, and you should receive a state refund.
Yeah that screen always messes people up. We keep complaining about it. At the end Turbo Tax shows you the net combined of federal and state but that is only for your own info. You will get the full refund and still need to pay the full tax due. Did you set it up to pay by check or Direct Debit out of your account?
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