Cashing money out of a Roth IRA can incur taxes and penalties if you are withdrawing the money early, but moving the IRA to a new custodian should have no tax penalty -- assuming you do it right. Making a simple mistake, however, can mean that you'll pay taxes on your earnings.
In a direct transfer, your current custodian will directly transfer the money to your new custodian. You never see the money. To do this, you'll have to open the new account and instruct your current custodian to perform the transfer, providing new account numbers and telling the current custodian how much of the account you want to transfer. There is no tax penalty for this type of transfer.
If you choose an IRA rollover, the current custodian will write you a check for the full amount, and you are responsible for depositing it into a new account within 60 days. Within that time period, you are free to use the money as you like, technically getting a short-term loan from your IRA. There is also no tax penalty for IRA rollovers, as long as you deposit the money with the new custodian within the 60-day limit.
Rollover vs. Withdrawal
When choosing a rollover, it's important to specify this with the current custodian, as they may confuse it with a withdrawal. In a withdrawal situation, you would have to pay a 10-percent penalty on the earnings in the account, as well as paying tax on those earnings as though it was income. The custodian will also withhold that 10 percent, and if you mean to deposit the full amount -- avoiding real tax penalties -- you'll have to come up with that money from your own savings. You will receive the 10 percent back at tax time. Make it clear that you wish to do a rollover so that the custodian will not withhold this 10 percent.
Missing the Deadline
The only time that you'll see a tax penalty in transferring your account to a new custodian is if you try to do an IRA rollover and miss the 60-day deadline. The 60 days includes weekends and holidays, so if the last day falls on a holiday, get your payment in early. If you miss the deadline and you are younger than 59 1/2 and not disabled, you will have to pay a 10-percent penalty on the earnings only. Those earnings will also be taxed at your current tax rate, but you will not have to pay taxes on any contributions. If you are over retirement age and have had the account for more than 5 years, you will not have any tax penalty. If the account is younger than 5 years, though, you will have to pay the taxes on the interest.