You took money out of your Roth IRA last year, thinking it was tax free (isn’t the selling point of a Roth IRA tax free withdrawals in exchange for giving up an up-front tax deduction?) Not so fast, my friend! (I always wanted to say that.) There are some situations where you may still owe both tax and penalties unless you follow the rules. See this article in MarketWatch from the Wall Street Journal by Bill Bischoff for more details:

http://www.marketwatch.com/story/taxes-on-roth-ira-withdrawals-2014-02-25

Remember by giving up the tax deduction now, instead of deferred taxation of all the earnings like in a traditional IRA you get tax free earnings, but you have to keep the earnings in the Roth IRA for five years or until you turn 59 1/2, whichever is later. If you take your earnings earlier then that there can be taxes and/or early distribution penalties on them. Make sure you know the rules and apply them to your situation before you take any money out.

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