About 50,000 taxpayers who had filed their returns before an error in an Obamacare tax form was discovered will be able to keep the money, the IRS said yesterday.

The erroneous forms went out to 800,000 taxpayers. Most of those citizens will have to wait for the IRS to mail them a corrected form before they can file their taxes.

Treasury said people who did not pay enough in taxes because of the glitch will be allowed to keep the money. If they paid too much, then they have the option of filing an amended return to get their money back.

The administration has not provided a breakdown of how many people paid too little and how many paid too much.

"The IRS will not pursue the collection of any additional taxes from these individuals based on updated information in the corrected forms," a Treasury spokesman said.

"Individuals may want to consult with their tax preparers to determine if they would benefit from filing amended returns," the spokesman added.

The tax error was a setback for the Obama administration, and Republicans seized on the mistake to argue that the law is a burden on the public.

Senate Finance Committee Chairman Orrin Hatch (R-Utah) wrote to the administration on Monday asking for answers about how the error happened and why it wasn't revealed until after the ObamaCare sign-up period had ended. 

Another shortcut, another disregarding the law. I suppose we should be used to it now. But its unfair that some taxpayers will benefit from the incompetence of the IRS and others won't,

And that's just the beginning of the "adjustments" this tax season. H&R Block is reporting that a majority of people who received subsidies are going to owe the government money due to overpayment:

A majority of ObamaCare customers, 52 percent, are being forced to pay back some of their subsidies during this year’s tax season, according to new data from H&R Block.

Customers are paying back an average of $530, which has caused a 17 percent drop in the average return so far this spring, according to the analysis by the tax services giant.

The Obama administration had warned that people could end up paying back some of their subsidies because many were relying on previous years’ income when applying for the tax breaks.

H&R Block has predicted that “most filers” would owe some of their subsidies back to the federal government because they were relying on 2012 income.

The new data, which was released Tuesday, only represents about six weeks of tax filings. Still, it could pose a significant challenge for the administration as it faces an already tough tax season.

Who cares if the administration "warned" us? The subsidy overpayment is the result of the Obamacare web site not being completed and thus not able to figure accurately the subsidy due the taxpayer.

Next month will be crunch time when approximately 6-8 million taxpayers will be forced to pay the penalty for not having insurance - most of them unaware of what's about to hit them. That rate of decline in the amount of refunds will go up even more when the IRS takes the penalty out of taxpayer's checks.

And the nightmare continues...

Hat Tip: Ed Lasky