If I remember correctly, this problem is caused when you remove a user but some of it's files are still on the system. Maybe you had a user earlier and for some reason you might have removed the user. If the user info was not deleted correctly, you will not be able to create a new user of the same name,
To solve this, go to System Settings->Users and Group and from there remove the user. Now you will be able to create the user.
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