It's unfortunate however it is tax law. Your earnings from your 1120S-K1 where you do provide the services are not included in your total earnings to determine the amount of your allowed Roth IRA contributions. You can use the link to the publication below for more information. The definition of earnings does not include your profits from the S corporation because they are not part of the compensation definition as noted by our Tax Champ @Opus 17.
Compensation includes:
- Wages, salaries, etc.
- Commissions
- Self employment income
- Self employment loss
- Alimony and separate maintenance
- Nontaxable combat pay
- Graduate or postdoctoral study
Compensation does not include:
- Earnings and profits from property, such as rental income, interest income, and dividend income.
- Pension or annuity income.
- Deferred compensation received (compensation payments postponed from a past year).
- Income from a partnership for which you don’t provide services that are a material income-producing factor.
- Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040), line 1b.
- Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs.
IRS Publication 590A
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