Only the amount that is reported in box 1 of your W-2 is available to support an IRA contribution. If you deferred all of your income (less tax withholding) to the traditional account in the 401(k), you have only the $700 of tax withholding remaining to support a Roth IRA contribution. (Boxes 1 and 2 of your W-2 will both show $700.) Had you contributed all of the money to a Roth account in the 401(k), that same money could have been used to support a Roth IRA contribution as well since amounts contributed to a Roth account in the 401(k) do not reduce the Box 1 amount on your W-2.
If you are married, file jointly and your spouse has greater compensation, you can use your spouse's compensation to support your IRA contribution (provided your spouse has not used all of this compensation to make an IRA contribution).
