Roth IRA contribution limit

I have a question regarding the Roth IRA contribution limit. I made a contribution of $3000 to my 2005 Roth IRA before the April 17 2006 deadline thinking the limit for me was
$4000 (I don't have other retirement accounts such as traditional IRA, etc). The other day I was reading Publication 590 and realized I might have made a mistake. Here's what Pub. 590 says about the Roth IRA contribution limit: Roth IRA contribution limit. If contributions were made on your behalf only to Roth IRAs, your contribution limit for 2005 is generally the lesser of: $4,000, or Your taxable compensation for the year. The term "taxable compensation" in the second one is very confusing to me. My modified AGI for Roth IRA purposes was low enough so it shouldn't affect anything. My uncertainty is the following. My AGI (line 37 of Form 1040) was so low that after taking the $5000 standard deduction and $3200 exemption my taxable income (line 43 of Form 1040) was zero, which means I got all my year 2005 income tax back. Do this mean my "taxable compensation" for 2005 was also zero and thus I should have made zero contribution to my 2005 Roth IRA since zero is the lesser of $4000 and my taxable compensation for the year? Pub. 590 only gives the definition of "compensation", not "taxable compensation". I'm guessing the latter is different than another term "taxable income" because tax laws usually use terms precisely. I even email IRA and got a reply. But in the reply the employee went on and on with explanations about "compensation" instead of "taxable compensation", which is useless to my case. So I'm turning to this forum to seek some clarifications on my question. Please help me determine what my contribution limit for 2005 Roth IRA really was. Thanks a lot! Wen
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No. Your taxable compensation was the amount of compensation you received, unless some of it was specifically not taxable (though I'm not sure how that would happen; maybe some small prizes are exempt). The fact that the tax rate on your taxable compensation was 0% doesn't mean it wasn't taxable. Seth
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ehw6 wrote:

What did your Adjusted Gross Income consist of? Was it W-2 wages (line 7), self employment income, interest, dividends or Social Security income? Did you receive alimony? The W-2 wages, self employment income and alimony are all "taxable compensation". Interest, dividends and Social Security or pension are NOT. Note "taxable compensation" IS NOT your "taxable income".
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ehw6 wrote:

Taxable compensation is any compensation on which you pay taxes. Generally, this is compensation reported to you on a W-2 and reported on your 1040 on line 7, and net income from self-employment, reported on line 12 of your 1040. So your W-2 income and net income from self-employment had to have been at least $3000 in order for you to make a contribution to your Roth IRA. If you are married and filing jointly, you can include compensation from your spouse, so that the sum of line 7 (wages) and line 12 (business income) must be equal to or greater than the total of IRA contributions for both of you.
Dennis
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Seth Breidbart wrote:

Or not "compensation", such as interest, dividends, pensions, IRA withdrawals, etc., taxable or not.
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