We gave the landlord a formal notice on july 1st, telling him we will be withholding our rent until he fixes the problem, nothing has been done to fix the problem yet the manager is asking us for the rent already.

there is a very precise way it needs to be calculated using the useful life left of the damaged item to calculate the amount you can withhold for example if carpet was damaged and the useful life of the carpet was 5 years and the carpet is 5 years old you cant charge them at all    To answer your question I would create a deposit accounting and describe in detail what you are charging for .  

I understand that there should be reasonable fee's with regards to this but I also don't agree that they should be withholding 2/3rds of a $2250 deposit for tenants that left the place absolutely spotless.

Don’t withhold rent as them they will have potential grounds for eviction.

Reasonable delays in repairing are okay, though in certain circumstances, they can withhold a few days rent.

The tenant can call fair housing and withhold rent based on the property not being safe-mice carry germs.

The kind of tenant who 1. allows another to occupy without permission, 2. is dishonest (or at least withholding) about his occupancy, and 3. allows him to smoke inside - probably not the best in the long-term.

If you tried to withhold the deposit the tenant may decide to press their case in course and you would most likely have a difficult time convincing a judge that these issues are the tenants responsibility... especially since you don't have evidence of the condition before move in.Anytime I am purchasing a property where I am inheriting tenants I always assume that I will be returning the entire deposit to the tenant and I build that into my numbers.

And then she says she is now withholding rent because of 'mold', but she stays there.  

Back then I can have a cheapo painter do a 2BR apartment for $500, so for $200 more, I can have the whole apartment painted, spackling holes included.But the worst part is some tenant gets so mad at you for withholding part of the deposit, sues you as a matter of principal, and you have to go to court.