Roth IRA and K1s

Hi, I screwed up. I set up a Roth IRA after extensive research and now it seems like I'm not allowed to have a Roth IRA. WHAT NOW?

I set up a Roth IRA last year with Vanguard and thought that I qualified to contribute however when filling out my taxes I was alerted that I had made an excess contribution because my earned income is zero. All of my income comes from a share of my business' income which is recorded on a K1. Am I not allowed to contribute to a Roth IRA? As a temporary measure I've switched my contributions from 2007 to 2008 to buy myself some more time to figure out what to do. I really want to set up a retirement plan but don't know what to do now.

It's going to be kind of hard to set up a retirement fund if your earned income is always zero. Maybe you can have your parents issue a 1099 to you as a contractor for your services. Or, they "put you on the books" and issue a W2.

If the income is passive (you don't materially participate), you may be out of luck as this sort of income is considered to be unearned by the IRS.

My parents? Uh... yea, they have no involvement in any of this. I do designate my full material participation in the business.

Oops, don't where I got that exactly. Anyway, that doesn't change the fact that you need to show an income to contribute to a retirement plan. You need to declare a salary on your K1.

currently on the K1 I put my earnings in the first box.... Ordinary Business Income. I don't understand why thats not showing an income?

Pricespector had it right in their first post, you need earned income.

Earned income is shown on a W-2, and Schedules C or F.

You should receive a W-2 from the business, then you can have an IRA.

that makes sense, but seems crazy that i can't have a schedule k1 and have a retirement account.