I claim that $I(S) = (xy, y(y - 1)).$ First, observe that $xy, y(y-1)\in I(S).$ Now, consider an arbitrary polynomial $p(x,y)\in I(S).$ Subtracting off any terms which are multiples of $xy$ already, we may assume that $p(x,y)$ is of the form
$$
p(x,y) = a + \sum_{i > 0} b_i x^i + \sum_{j > 0} c_j y^j.
$$
It suffices to prove that $y(y - 1)\mid p(x,y).$
Since $p(x,y)\in (y)\cap (x,y-1)$ is a multiple of $y,$ we have
\begin{align*}
0 &= p(x,0)\\
&= a + \sum_{i > 0} b_i x^i + \sum_{j > 0} c_j 0^j\\
&= a + \sum_{i > 0} b_i x^i.
\end{align*}
The only way for this to be true is if $a = 0$ and $b_i = 0$ for all $i.$ Thus,
$$
p(x,y) = \sum_{j > 0} c_j y^j = y\sum_{j > 0}c_j y^{j-1}.
$$
Let us write $p(x,y) = yg(y),$ where $g(y) = \sum_{j\geq 0}c_{j+1} y^j.$ We know that $p\in(x,y-1)$ if and only if $p(0,1) = 0,$ so that $g(1) = 0.$ However, this tells us that $y - 1\mid g,$ which implies that $y(y-1)\mid p,$ as desired.