There are two ways to do it (probably more).......

1) If you save it as a tiff, then open it in windows picture viewer and save it as a png file.........and voila!!! A transparent background!!

2) Another way is to open the iff file in photoshop and select the alpha channel (then select inverse) and delete the background. This also works.

Thanks BobV. I found the iff plugin and it works on my Photoshop perfectly.