My question involves independent contractors in the state of: PA
I have been working for the same company for approximately 2 years. For about 1.5 of those years I have been a salaried employee, with all the usual benefits/expectations of that: I have company-paid medical insurance, I have paid time off, I am expected to work 40 hours a week unless I have requested time off, I have a specific desk in the company's office that is "mine" that I use and no one else uses, I am told exactly what I am to be doing at work on any given day, etc. Just recently the company has decided that I (and the other employees) will now be considered as independent contractors. None of my work duties/expectations/benefits/etc have changed. They basically worded the switch as "everything will be exactly the same, except you get your whole paycheck without taxes being taken out". This wasn't done in writing and I haven't signed any contracts or anything.
Now I am 99% sure that this is a misclassification of 'independent contractor'. The only thing that remotely resembles me being one is the fact that I have flex hours and can work from home up to 2 days a week (I usually do 1). I use my own equipment when I do this. I can choose to stop doing this, of course, but I don't know how much weight this has in arguing that I am indeed an independent contractor should that argument come up.
They have outright told us that the reason they are doing this is because money is tight and they can save money by not paying taxes for employees. The implication seemed to be that the other alternative would be for everyone to take a minor pay cut, and they view the fact that we can deduct "all sorts of expenses" as a big benefit to us. They seem to think that we will actually pay LESS taxes in total because of this. I estimate that I will pay rather more.
I intend to have my taxes done by a CPA this year, and not by their CPA because I want someone with a totally unbiased opinion on the situation.
My questions/concerns are these:
1. Am I correct in thinking that I am clearly misclassified? Is there any way that they can argue that I am NOT misclassified?
I know that there's a form I can file to get the IRS to evaluate my employment status. If I do this, assuming that they find that I am technically an employee,
2. What's the likelihood of them making that investigation of the other employees of the company, without them also filling out the form?
3. Would they be able to find out that it was me who filled out the form? Is it possible that the IRS would do this investigation on their own, perhaps by having looked at a tax return and having found something odd about it?
4. What are the likely ramifications of me doing this? I know it will certainly make them angry. Can I be fired? If I can, is it likely that I will be fired?
It's a very small company, and they have claimed that I am "invaluable", that they would be "lost without me", that they consider my contribution roughly equal to the business owners' , and so on. On the other hand, a partner company recently fired someone on 1099 who is filing for unemployment claiming to be an employee and they seem rather disgusted that the person would do so, and rather angry that the other company may end up paying taxes and penalties for this person.
5. If I choose not to file the form, and go ahead and pay my (extra) taxes anyway, is it possible it might trigger the IRS to do the investigation on their own? If this happened, would I get the extra taxes I paid back?
6. If I pay the extra taxes, then find another job, but after April 15th, is it possible for me to file that employee status form and get back extra taxes that I shouldn't have paid, even though it's after the fact and I no longer work there?
7. The big question: if we consider that I really do like my job, that it may take a long time to find another one, that this was probably done more out of lack of knowledge than malicious intent, and I am reinstated on salary at the beginning of the year (which is what's supposed to happen), is it even worthwhile to pursue this over $500 or so in extra taxes? Would I be better off to just bite my tongue and pay in order to keep my job?

