Everyone loves getting a tax refund. That’s strange, since a refund means you’re essentially getting back your own money. A tax refund is a result of overpaying your taxes to the government along the way, likely by having too much money withheld from your paycheck.

Most of us consider a refund to be the lesser of two evils. If too little money is withheld, you could owe a lot of money when you file your return in April. Still, the IRS says the average refund check was $2,800 per return last year — a huge, interest-free loan to the government. It’s more sensible to come out about even at tax time.

Withholding and the new tax law

The new tax law has made figuring out the appropriate amount of withholding even more difficult. Your personal exemption disappeared, and your standard deduction has increased. Some of your larger deductions for state income and property taxes may have become less useful, given the new $10,000 limit. And, of course, tax rates are lower.

The Treasury department has just created a new online withholding calculator, designed to help you figure out how much to have your employer take out of every paycheck. And the calculator is not just for wage-earners who get a regular paycheck. There’s a place to input income from self-employment and other non-wage income such as dividends or interest. That’s a help not only to the wealthy but also to retirees who may receive pension income or retirement plan withdrawals from which taxes are not withheld. They need to estimate quarterly tax payments.

The most basic criteria for calculating withholding include personal issues such as how many children you have, whether your spouse works and your filing status (e.g., filing a joint return of married filing separately).

Using the new calculator can help you determine whether your current withholding amounts are adequate. You might owe more taxes — even at lower tax rates if fewer deductions are allowed. Oops, there goes the “extra” money in your paycheck.

Using the calculator

Here’s a link to the IRS’ new online withholding calculator

The form is simple to fill out, but it will be helpful to have your most recent tax return and latest paycheck stub available, since the calculator asks for your expected gross income for the year, and the amount currently being withheld from your paycheck for taxes. Other information from last year’s return includes questions about claiming child care and dependent credits, and how much you deducted last year for things like charitable contributions or medical expenses.

You don’t have to input any personal information, such as your name, social security number, address or other identifying features. And the IRS does not “save” this information. It’s purely a tool to help you calculate how much you should be paying in per paycheck, or per quarter.

How do you adjust your payroll withholding? Just ask your employer for a new form W-4, on which you list the number of exemptions you claim. And if your circumstances change during the year — such as a job loss or a big bonus — you’ll want to go back to the calculator once again to make an adjustment to your payroll withholdings or quarterly estimates.

The IRS warns that if you have a complicated return, or might be subject to the alternative minimum tax, or have huge capital gains or qualified dividends, you should consult your tax preparer to make sure you have adequate withholding.

There’s another very practical reason for looking at your withholding under the new tax laws now. As long as you pay in at least 100 percent of your tax liability from the previous year (2017 for the 2018 tax year), or pay in at least 90 percent of the current year’s required taxes, you can avoid the substantial penalty for underpayment of estimated taxes. (You will still owe the taxes, but not the penalties!)

Rarely do I find a reason to thank the IRS for anything. But this calculator is an exception, since it will save so many people a hassle next year at this time. And that’s The Savage Truth.

Post Script:  One of my sharp readers says there is a “mistake” in the calculator — that it doesn’t take into account enough pay periods for those who are paid bi-weekly.  I’ve contacted the IRS  (as did the reader) and hope this issue is resolved soon.