The IRS will prevent you from e-filing if your withholding amount is above a certain percentage of the income amount. It is a security measure. TurboTax has no control over it. If the numbers are entered properly from your Form 1099-G, and your withholding equals the income, you won't be able to e-file your return so you will need to mail it in.
Please see this thread for another discussion of this issue.
See here for a list of IRS e-file errors and explanations.
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