My big question on this applicant is tax withholding.  

She borrowed from her 401K, and she also changed her withholding on her paychecks, so less was withheld.  

At least send a notice of intent to withhold within the 14 days was my lesson learned here in WA!

If the new tenant meets you criteria, proceed to make arrangements with the current tenant to do a walk-thru/ assessment (while occupied), have her prepay prorated rent for the time that she'll be occupying the unit until move-out.Also, I would withhold only 1 month of the two months rent deposit for breaking the lease and agree to refund the the other months rent  (for finding you another qualified to tenant) if there are no damages beyond normal wear and tear, and all monies, prorates etc.. are paid. 

Had you hired someone to do the clean up I would say deduct the cost from the deposit, such as in the $65 garbage fee, but since you did the clean up yourself and are not out of pocket you do not have a justification to withhold.

My daughter changed her withholding with the IRS for about a year, and saved the additional take-home money, so she'd have a big enough down-payment.  

I will also make sure to call her my tenant and threaten to withhold her security deposit for just about anything she does whenever friends are around, just cause I really like annoying her. 

I would never think of withholding information from a landlord and have zero respect for any landlord that would.

I am not sure if I will say anything at all... maybe I will just let the lease finish and then withhold some of the security deposit (can I normally do that in this situation, claiming that the illegal 6th tenant increased wear and tear?).

I found this article on Florida law by the bar association, and it says that before a tenant can withhold rent for a place being uninhabitable, they have to first give the landlord 7 days written notice so the landlord has time to fix it.