That reference you posted is incorrect or you misread it. It should have reference IRS Publication 590A and not 970.
Publication 590-A (2019), Contributions to Individual Retirement Arrangements (IRAs)
https://www.irs.gov/publications/p590a#en_US_2019_publink1000230355
Says Scholarships are indeed earned income for IRA contributions but *only* if shown in box 1 of Form W-2. In your contributions are limited to the $1,000 of your earned income. Anything contributed in excess of that is an excess contribution that must be removed as a "return of contribution" before the due date of the tax return to avoid a penalty.
What Is Compensation?
[quote]
Generally, compensation is what you earn from working. For a summary of what compensation does and doesn’t include, see Table 1-1. Compensation includes all of the items discussed next (even if you have more than one type).
Wages, salaries, etc.
Wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services are compensation. The IRS treats as compensation any amount properly shown in box 1 (Wages, tips, other compensation) of Form W-2, Wage and Tax Statement, provided that amount is reduced by any amount properly shown in box 11 (Nonqualified plans). Scholarship and fellowship payments are compensation for IRA purposes only if shown in box 1 of Form W-2.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
