Running a small bakery is all about the right ingredients—flour, sugar, butter, and of course, the perfect team! But just like baking, hiring help comes with its own recipe for success. One of the trickiest ingredients? Figuring out whether your workers should be 1099 contractors or W-2 employees. Get it right, and your business runs smoothly. Get it wrong, and you could have a big ol’ tax mess on your hands!
The Sweet Differences Between 1099 and W-2
When you bring people into your bakery, you need to decide if they are independent contractors (1099 workers) or employees (W-2 workers). The IRS has pretty clear guidelines, and trust us—you don’t want to get on their bad side.
1099 Contractors: Freelancers with a Side of Flexibility
A 1099 contractor is like a guest baker—someone who helps out but isn’t officially part of your kitchen crew. These folks set their own schedules, bring their own tools, and handle their own taxes. That means less paperwork for you! Examples of 1099 workers in a bakery might include:
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A freelance cake decorator hired for special events
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A part-time social media guru who makes your pastries look irresistible online
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A handyman who fixes that pesky oven that keeps acting up
Since 1099 contractors handle their own taxes, you only need to send them a Form 1099-NEC if you pay them more than $600 in a year. Easy as pie!
W-2 Employees: Your Bakery’s Main Ingredients
A W-2 employee is a core part of your bakery—someone who follows your schedule, uses your equipment, and keeps the business running. Unlike contractors, you’ll need to withhold taxes from their paychecks and provide a W-2 form at the end of the year. Examples of W-2 employees in a bakery include:
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The baker who knows your secret snickerdoodle recipe by heart
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The friendly cashier who keeps the coffee flowing
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The kitchen assistant who preps all your dough to perfection
Since these workers depend on you for their job, they also get benefits like overtime pay and legal protections.
How to Tell the Difference
The IRS has a few “baking tests” to determine if a worker should be classified as a contractor or an employee:
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Behavioral Control – Do you tell them exactly how to do their job? That’s an employee.
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Financial Control – Do they use your tools and rely on you for steady income? Employee again!
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Relationship Type – Are they in it for the long haul with benefits and a steady schedule? Yep, that’s an employee.
Why It Matters (A Lot!)
Mixing up 1099s and W-2s isn’t just a small oopsie—it can lead to hefty IRS fines, back taxes, and legal troubles (and nobody wants that kind of cookie crumbling!).
Proper classification ensures you:
✔ Stay on good terms with the taxman
✔ Avoid surprise penalties
✔ Plan payroll taxes properly
✔ Keep your bakery running smoothly
Final Whisk-ful Thoughts
As a bakery owner, you’re already juggling a dozen things at once, so understanding worker classification should be as easy as measuring out flour. If you’re ever unsure, chat with a tax pro—they’re there to help and make sure you stay out of tax trouble.
Cydni Mitchell Hodges
Business Blogger, Retail Bakers of America
Cyd Mitchell Hodges (aka Cyd) is a Bakery Consultant and the Sweet Business Coach behind Sweet Fest®. Based in Atlanta, GA, Sweet Fest® is an online company that supports the business needs of the Sweet Community in the areas of professional development, marketing, branding and web design.
By trade, Cyd is an accountant & financial analyst with a Masters from the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill. She is the Founder of the Sugar Coin Academy, an online business academy for business owners in the baking and sweets industry, and she is also the organizer of The Ultimate Sugar Show, Georgia’s Largest Annual Baking and Sweets Expo in Atlanta. She is also the Business Blogger for the Retail Bakers of America.