If you work for yourself or run a small business, odds are you've just wrapped up some invigorating sessions with your calculator, racking your brain for ways to cut your tax bill before April 15.

Here's a tip: If you haven't already set up a retirement plan for your business, doing so could save you substantial tax dollars. Depending on the plan and the amount you contribute, you could deduct as much as $40,000 off your income next tax season.

Plus, starting this year, you may be able to save extra money through some new retirement-related tax breaks. To get you going, we offer a primer below on some of the most popular and (relatively) easy to establish retirement plans for small businesses.

New Perks

If you're a business owner, you can claim a tax credit of up to $500 toward the cost of setting up the plan, administering it and educating employees, for each of the first three years of the plan. The credit applies even if the only employee is you.

If you make contributions to a retirement plan on behalf of your employees, you can now deduct from your taxes whichever sum is smaller: your contribution or 25% of your employee's compensation, says Paul Gada, a small-business analyst at CCH and editor of the

Business Owner's Toolkit Tax Guide 2002

.

SEP IRAs

Most business owners choose from among three different kinds of retirement plans. Probably the most popular is the Simplified Employee Pension (SEP) plan, which can be set up through a fund company with a minimum of paperwork. The plan lets owners set aside as much as 25% of their compensation (or that of employees), up to $40,000, into an IRA account.

"If you're a sole proprietor, the SEP plan usually works the best because you get to put 25% of your compensation away," says Steven Levey, a certified publica accountant/personal financial specialist at Denver-based GHP Financial Group.

You don't have to file tax returns or get approval letters from the Internal Revenue Service for a SEP IRA. You can deduct the amount you invest from your federal taxable income, and many states let you take deductions, too.

As an added bonus, the deadline for setting up a SEP is later than any other plan. "With a SEP, you can make a contribution up until the filing date, plus the extension. People could even use it this year

for tax year 2001, if they're self-employed individuals who've not yet filed their tax return and had to file for an extension," says William Howard, a Memphis, Tenn.-based certified financial planner.

SIMPLE IRAs and 401(k)s

If you're just getting started and have a small profit, you might consider setting up a SIMPLE (Savings Incentive Match Plans for Employees) plan, which can be either an IRA or 401(k). With this plan, you can contribute as much as 100% of your income to the plan, up to $7,000 per year, though you can also choose to forgo contributions in a lean year.

Separately, the company is required to chip in 2% or 3% of your compensation.

Because the contribution limit is lower than other plans, SIMPLE plans make the most sense for people with low incomes. "The SIMPLE IRA is really only the best plan for you if your goal is to contribute the most you can to a retirement plan and if your income is under about $10,000," says Twila Slesnick, a Dublin, Calif.-based pension consultant and author of

Creating Your Own Retirement Plan: a Guide to Keoghs & IRAs for the Self-Employed

.

As with a SEP, you don't have to file a tax return for a SIMPLE plan. You can usually set it up directly through an investment company.

401(k)s

Like a SEP, a 401(k) lets employers contribute as much as 25% of workers' compensation to a retirement account. But on top of that, you and your employees could contribute an additional $11,000 out of your own income. "So now it's effectively like having a SEP, and on top of it allowing salary deferral contribution," says Slesnick.

But in practice, bureaucratic hassles discourage small businesses from setting up 401(k)s for a group of employees. The government makes even the smallest outfits adopt a written plan that must pass muster with the IRS, and 401(k)s must abide by strict rules to ensure that their benefits don't all go to the highest-paid people at a company.

Choosing the Best Plan for Your Business

If you're a one-person company with at least decent-sized profits, you're probably best off with a SEP.

But if you have employees, it's tougher to figure out which is the best plan for your business. "You need to do the math to see how you can give yourself the most money while giving your employees the least, so it doesn't cost a lot to contribute to your own plan," says GHP Financial's Levey.

Say you earn $100,000 and pay your employee $30,000. Consider how much you'd have to pay out under each of the three plans.

With a SIMPLE IRA, the employer match is capped at 3%, which would amount to $900 for the employee earning $30,000. At the same time, you'd be eligible to set aside $7,000. On top of that, you'd add in the 3% match for your $100,000 salary, or $3,000.

In other words, with the SIMPLE IRA you'd spend $900 on your employee, to be allowed to save $10,000 for yourself.

In contrast, if you wanted to max out your own contribution with a SEP IRA, you'd have to spend a lot more on your employee. If you put aside 25% of your own salary, or $25,000, you'd also have to set aside 25% of your employee's $30,000 salary, or $7,500.

In this case, it costs you $7,500 to be able to put away $25,000 for yourself.

Meanwhile, if your business has a 401(k), the amount you're allowed to contribute depends on how much your employees voluntarily set aside. If they don't contribute enough money, you may either have to ante up on their behalf or reduce what you contribute yourself. For that reason, many small-business owners adopt a SEP or SIMPLE plan instead.

TheStreet.com has a revenue-sharing relationship with Amazon.com under which it receives a portion of the revenue from Amazon purchases by customers directed there from TheStreet.com.