Stop panicking ... if you have been reporting the 1099 income on a Sch C then you have nothing to worry about. But you did say that you and some others were involuntarily switched from employees to sub contractors for doing the exact same job which is illegal on the part of the employer not you. Sounds like someone else turned in the employer but refusing to just accept the employer's BS and not you are being asked to honestly answer some questions to determine if the employer is in trouble NOT YOU.
The IRS will not put you in jail or anything else without your having a chance to make the corrections.
