It has been five years since Congress enacted the Roth IRA, but complexities of these tax-free retirement accounts and the ways in which they interact with the rest of our increasingly complex tax code continue to catch many taxpayers by surprise.

Roth IRAs, named after William V. Roth Jr. (R-Del.), onetime chairman of the Senate Finance Committee, are individual retirement accounts that are funded with nondeductible contributions on the promise that withdrawals will be tax-free in retirement.

The accounts have considerable appeal. For example, holders of traditional IRAs must begin taking minimum withdrawals, which are taxable, at age 701/2, whether they need the money at the time or not. By contrast, Roth owners can leave the accounts to grow tax-free as long as they wish. They can even, if they do not need the money themselves, leave an account to generate a lifetime stream of tax-free income for an heir or heirs.

Many of the Roth accounts being created these days are conversions by people with traditional IRAs. The move means jumping through a lot of hoops, but many people are finding it worthwhile nonetheless.

Traditional IRA-to-Roth conversions are allowed only if the account holder has an income under $100,000 (married or single -- note the whopping marriage penalty). That ceiling has kept many from opening a Roth in the first place.

There's one group that, on the surface, can be ideal for Roth conversions: retirees. Their incomes may be lower than they were when the retirees were working, and they may very well like the idea of leaving income to heirs. But things quickly become tricky.

First, people of any age converting to a Roth have to pay tax on the pretax contributions they made for so many years to their traditional IRA and on the earnings. (The money to pay the tax generally should come from other sources, too. If you pay the taxes with money from the traditional IRA, it not only reduces your ultimate accumulation but can also subject you to an early-withdrawal penalty if you are under age 591/2.)

Okay, fair enough: Put the remaining money in a Roth and the principal and everything it earns from then on can be withdrawn with no further consequences.

But there's a post-conversion land mine lurking, tax experts caution, for those who have already retired and are drawing Social Security benefits.

The taxation of Social Security benefits is complex, but, put simply, for those at the lower end of the income scale, benefits are tax-free. Then as a retiree's income rises past certain thresholds, first 50 percent of the benefits, then 85 percent become taxable.

You can see where this is going, right?

When you convert your traditional IRA to a Roth, the income you have to report from the conversion goes into this calculation -- even though the cash stays in the account.

If that pushes your income past any of the thresholds, you suddenly have to pay tax, or more tax, on your Social Security benefits in the year of the conversion.

"Often these things just get caught when they go to their tax-return preparer," said Bob D. Scharin, editor of Warren, Gorham & Lamont/RIA's Practical Tax Strategies, a monthly journal for tax professionals. Some taxpayers, when they learn the unhappy news, may opt to undo the conversion, which is generally allowed, up to the due date (plus extensions) for the return for the year in which the conversion was made.

But Scharin noted that not everyone understands this.

An Ohio couple named Helm recently had to pay more than $3,500 in additional taxes after failing to convince the U.S. Tax Court that, because they didn't actually receive the money, conversion of their roughly $85,000 in traditional IRAs to Roths shouldn't count when figuring whether their Social Security benefits were taxable.

The Helms "do not fully appreciate the tax consequences involving a conversion of a traditional to a Roth IRA," the court said.

But there is also a potential Social Security upside after a conversion.

Distributions from traditional IRAs are included in taxable income and can result in making your Social Security benefits subject to tax, too. With a Roth, not only do you not have to take distributions, but if you do, the "distributions will not count as income for figuring the tax on Social Security benefits," Scharin said. They simply don't count as "taxable income."

So, if your only income is your Social Security benefits and your Roth IRA withdrawals, which can of course be substantial -- poof, a tax-free retirement.

The Internal Revenue Service is looking for 96,792 taxpayers who are entitled to a total of $80 million in undelivered tax-refund checks. To help make contact, the agency has added a feature to the "Where's My Refund?" section on the IRS home page at so that taxpayers who think they are missing a refund can check.

To use the site, taxpayers must enter their Social Security number, their filing status (such as single or married filing jointly) and the amount of the refund shown on their 2001 tax return. Taxpayers then see a Web page that shows the status of their refund check. Taxpayers also get instructions for resolving problems, whether it's an undelivered refund check or some other refund-related issue.

The most common reason for refund checks to go astray is that the taxpayer has moved and didn't give the IRS his or her new address.

Taxpayers without access to the Internet who think they may be missing a refund check should first check their records or contact their tax preparer, then call the IRS toll-free assistance line at 800-829-1040 to update their address.

The District last week announced the opening of its Section 529 college savings plan. This is a savings/investment vehicle whose earnings are tax-free when used to pay for college. There is no federal tax deduction for contributions but D.C. taxpayers can get a city tax deduction of up to $3,000 ($6,000 for a married couple) for contributions each year. The program offers a number of investment options, including socially responsible funds operated by the Calvert Group. Information is available at or 800-987-4859 (for D.C. residents) or 800-368-2745 (for nonresidents).