Right, you should have rolled it over to a TRADITIONAL IRA not a ROTH. A Traditional IRA stays tax deferred and the earnings are tax deferred until you take it out. Then you pay tax on it and on any growth.
You put taxable income into a ROTH. You don't get a deduction for a ROTH contribution. You pay tax on it now. It grows tax free and when you take it out it is all tax free.
