The Child Tax Credit and the EITC when you are paid on a 1099

These two credits are real money, and a lot of nail families skip them because they assume 1099 or cash pay does not count. It does. Net profit from self-employment is earned income, which is exactly the kind of income both credits are built on. What actually stops families is not how they get paid. It is which number sits on the return, because both the Child Tax Credit and the EITC require a Social Security number and an ITIN will not substitute.

This guide assumes you already file as a self-employed person. If that part is still unclear, read filing taxes when the salon gives you a 1099 first, because the figure both credits run on is the profit line of your Schedule C.

Two credits, two different mechanisms#

The Child Tax Credit is counted per child and comes off the tax you owe. For tax year 2025 the IRS puts it at up to $2,200 per qualifying child. When the credit is larger than your tax bill, part of the remainder can come back to you as a refund through the Additional Child Tax Credit, worth up to $1,700 per child for tax year 2025 depending on your income.

The EITC is counted from your earned income and your family size, and it is fully refundable. If you owe no tax at all, the EITC still arrives as a refund. For a nail household on a modest income it is often the largest single figure on the return.

The two are not alternatives. A family that qualifies claims both on the same return.

Cash and 1099 income count, but only the profit#

The IRS earned income tables list self-employment income as earned income, alongside wages and tips. The IRS guidance written for tax preparers is blunter: "Net earnings from self-employment are included in earned income for EITC purposes."

The word doing the work there is net. The figure that feeds the EITC is not everything your clients paid you. It is what is left after business expenses, the bottom line of your Schedule C. Booth rent comes off first. Supplies come off first.

That has a consequence nobody explains to this trade: putting your cash income on the books can leave your family with more money, not less. The EITC is calculated from the profit line. Cash that never reaches the books pulls that line down, and pulls the credit down with it. For a household on a low income with children, the credit given up that way can be larger than the tax saved. The cheap way to check is to run last year's real figures through the EITC Assistant and compare the two results.

Which number each person needs#

Read this part before you do anything else, because it decides everything after it.

For the Child Tax Credit#

The Schedule 8812 instructions for tax year 2025 set two separate identification tests:

• The child needs an SSN valid for employment, issued by the Social Security Administration before the due date of your 2025 return, including extensions. The instructions state: "If you have a qualifying child who does not have a valid SSN, you can't use the child to claim the CTC or ACTC."
• You need one too: "If you, and your spouse if filing jointly, do not have a valid SSN, you can't claim the CTC or ACTC." On a joint return one spouse having an SSN is enough, and the other may hold an ITIN issued by the due date.

For the EITC#

Stricter again. The IRS eligibility page requires a valid SSN for you, your spouse, and every child you claim, issued on or before the due date of the return including extensions. Publication 596 spells out which numbers do not count: an SSN issued solely to apply for or receive a federally funded benefit, with no work authorization, is not valid for the credit. A card reading "Valid for work only with DHS authorization" does count, as long as that authorization is current.

The same page also requires you to be a U.S. citizen or resident alien all year, and, if you have no qualifying children, to be at least 25 and under 65 and to have lived in the United States for more than half the year.

If your household files on ITINs#

Those two credits close, but do not skip the return. The Schedule 8812 instructions say a filer with an SSN or an ITIN issued by the due date can claim the credit for other dependents. The IRS Child Tax Credit page sets three conditions for the dependent, and all three have to hold:

• they have an SSN, ITIN or ATIN
• they are a US citizen, US national or US resident alien
• they are claimed as a dependent on your return

The middle condition is the one that gets missed, because a dependent may be holding an ITIN for exactly the reason that fails it. Have your preparer check it person by person before you count on the money.

The IRS Child Tax Credit page puts that credit at up to $500 per dependent for tax year 2025. It is nonrefundable, so it reduces tax owed rather than arriving as cash, but 1099 households usually do owe tax, so it does real work.

Which number you can apply for, and where, is covered in applying for an SSN or an ITIN.

What makes a child a qualifying child#

The two credits count children under two different sets of rules, and this is where families get caught.

For the Child Tax Credit, the IRS requires the child to be under 17 at the end of the tax year, to be your son, daughter, stepchild, eligible foster child, sibling or a descendant of one of those, to have lived with you for more than half the year, to not have provided more than half of their own support, to be claimed as a dependent on your return, and to be a U.S. citizen, U.S. national or U.S. resident alien.

For the EITC, the age test is wider: under 19 at the end of the year, or under 24 if a full-time student for at least five months of the year, or any age if permanently and totally disabled. The child has to live in the same home as you in the United States for more than half the tax year, and be younger than you. Temporary absences for illness, school or military service still count as living with you.

Where the EITC runs out#

The EITC is not a flat percentage, so do not try to estimate it in your head. The IRS publishes a table for each tax year, and an EITC Assistant tool that works it out, available in Vietnamese as well as English.

For tax year 2025, the IRS table gives these maximum adjusted gross income figures:

The maximum credit for tax year 2025 is $649 with no children, $4,328 with one, $7,152 with two and $8,046 with three or more.

There is one more limit that quietly disqualifies people: investment income. For tax year 2025 it has to be $11,950 or less. Bank interest, dividends and rental income all sit in that bucket.

For tax year 2026, the IRS inflation adjustment release gives a maximum EITC of $8,231 for taxpayers with three or more qualifying children, up from $8,046 for 2025. The remaining 2026 figures are in Revenue Procedure 2025-32 and will appear on the IRS EITC table page. When you file, read the column for the tax year you are actually filing, not the one you are living in.

How profit drives the refundable part of the Child Tax Credit#

This is the point where self-employment income touches the Child Tax Credit directly. The Schedule 8812 instructions for tax year 2025 set the floor at $2,500 of earned income before the refundable ACTC begins, and compute it as 15% of earned income above $2,500, capped at $1,700 per child.

In practice, a year with very little Schedule C profit can leave you technically eligible for the Child Tax Credit while getting little of it back in cash, because the refundable part climbs with earned income. It is one more reason your books should reflect the true number in both directions.

At the other end, income can phase the credit out. The IRS page for tax year 2025 gives the full credit to filers whose income is no more than $200,000, or $400,000 on a joint return, with partial credit above that. Very few households in this trade come near it.

You have to file, even when you owe nothing#

Both credits arrive attached to a return. The IRS page on claiming the EITC says you must file a federal return "even if you are not required to file." If you have a qualifying child you also file Schedule EIC with your Form 1040. The Child Tax Credit travels on Schedule 8812.

If your income is 1099 or cash, your return already carries a Schedule C and a Schedule SE, so this is not a new pile of paperwork. It is two more schedules in a stack you are already assembling.

Expect the refund to be slower than your friends', and know that this is the law rather than a sign of trouble. The IRS states: "By law, we can't issue EITC or ACTC refunds before mid-February," and the hold covers the entire refund, not only the credit. That delay is exactly when refund advance loans get sold. Plan around the wait instead of borrowing against it.

What to keep in case you are asked#

Returns that combine the EITC with a Schedule C draw IRS questions, because self-employment income has no employer reporting it independently the way a W-2 does. The IRS says fictitious Schedule C returns are a growing problem, which is why the paperwork behind yours matters. The IRS expects records that support both the income and the expenses. Keep:

• A dated record of everything you were paid, cash included
• Receipts for supplies, booth rent, tools and license fees
• A mileage log if you claim vehicle expenses
• Proof the child lived with you: school records, medical records, government mail to the same address
• The Social Security cards of everyone named on the return

Most of that list is the same one you already keep for your 1099 filing. The records that support a Schedule C and the records that support an EITC claim are one set, not two.

Free help exists for exactly this#

The IRS funds VITA, which prepares returns at no charge for people on lower incomes, people with disabilities and people with limited English. Call 800-906-9887 or use the site locator on the VITA page in the sources.

Say two things when you book. First, that your income is 1099 or cash. Second, that you want the EITC and the Child Tax Credit looked at. Some sites limit how complex a self-employed return they will take, and asking first saves you a wasted trip.

Next steps#

• Check the numbers first. Work out who in the household has an SSN and who only has an ITIN. That answer decides which credits are open to you.
• If your child is eligible for an SSN and does not have one, apply now. It has to be issued before the return due date, and a card that arrives afterwards does not rescue that tax year.
• Total your Schedule C profit honestly, all income and all expenses, then run that figure through the IRS EITC Assistant to see where your family lands.
• If the whole household files on ITINs, ask your preparer directly about the $500 credit for other dependents so it does not get left behind.
• If you skipped earlier years, ask a VITA volunteer about filing them within the three year window. That money is usually still claimable, and ITIN households should ask specifically, because the filer SSN rule starts with tax year 2025 and 2022, 2023 and 2024 are judged by the rules of their own year.