Millions of taxpayers breathed a collective sigh of relief earlier this year when they beat the April 15 deadline for filing their federal tax returns. But many of those taxpayers-especially those who earn six-figure salaries-may have a gnawing feeling that they have forgotten something.

That "something" is taking advantage of some congressional largesse and converting a traditional individual retirement account to a tax-free Roth IRA. For the first time this year, taxpayers had the opportunity to convert no matter how much income they earned. Previously, taxpayers earning $100,000 or more were barred from converting a traditional IRA to a Roth.

Many people are under the misconception that the conversion privilege for more affluent taxpayers is a one-year opportunity only. This is just one of the many myths associated with what the new law allows and what it doesn't.

According to the Investment Company Institute, total IRA assets stood at $3.6 trillion in 2008, the latest year for which data is available. So separating IRA conversion myth from reality can make a big difference in how financial professionals and their clients tackle retirement planning.

The following are more common misperceptions, and the realities that you need to knowp>

Myth: The income limits for converting a traditional IRA to a Roth IRA are lifted for one year only in 2010.

Reality: The new law that allows investors to convert their IRAs without regard to income limits extends beyond 2010. There is no deadline for conversions unless Congress changes the current law. However, the ability to choose whether to include conversion income in 2010, or divide it equally in 2011 and 2012, is only for conversions done during calendar year 2010. The ability to convert to a Roth IRA, regardless of modified adjusted gross income (MAGI) or tax filing status, is permanent.

Myth: Only one conversion is allowed per year.

Reality: A traditional IRA can be converted into multiple Roth IRAs, providing significantly more flexibility for investors to reach their retirement goals. Converting to multiple Roth IRAs allows individuals to invest more aggressively in some Roth IRAs and less aggressively in others. One of the Roth IRAs can be re-characterized into a traditional IRA in the same year.

Myth: The entire traditional IRA must be converted into a Roth IRA.

Reality: A portion of assets within a traditional IRA can be converted into a Roth IRA. Taxes on the conversion can be paid with assets outside the IRA, which allows clients to convert only as many assets as they can afford to pay taxes on.

Myth: Once an IRA is converted into a Roth IRA, the 2010 tax rate is locked in for future years.

Reality: Taxes must be paid on IRA holdings at the prevailing tax for that particular year. If an IRA is converted in 2010, the tax liability can be spread over 2011 and 2012. Taxes must be paid on whatever tax rate is applicable at that time. If taxes rise in 2011 or 2012, the tax liability on converted IRA assets would rise with it.

Myth: Roth conversions cannot be made by people who are under age 59-1/2 or over age 70-1/2.

Reality: There is no age limit for conversions. Those older than 70-1/2 must satisfy their required minimum distribution (RMD) before converting the remainder of their assets. Also note that conversions made before age 59-1/2 can have a 10% penalty, to the extent that the IRA assets are used to pay the tax liability.

Myth: The required minimum distribution amount can be converted.

Reality: The RMD must be taken before the remainder of the IRA is converted. The RMD itself cannot be converted. Those who own multiple IRAs can take the RMD from one account to satisfy the RMD for all IRAs. Conversely, an RMD must be taken from each qualified retirement plan (QRP).

Myth: Investors who are still working cannot convert their current qualified retirement plan into a Roth IRA.

Reality: It may be possible to convert some assets-if the current QRP allows for in-service, non-hardship withdrawals. Investors should consult their retirement plan's summary description for more information.

Myth: Roth IRAs are inherited free of estate tax.

Reality: Assets within a Roth IRA are included in a taxable estate, as are the assets within a traditional IRA and QRP. Paying taxes to convert to a Roth IRA can remove the assets used to pay taxes from a taxable estate. Investors should speak with their financial and tax advisors before pursuing this strategy.