Explain to your employer that they should issue you a W-2, not a I-1099.
Mr. Shusterman's (former INS Trial Attorney, 1976-82) response to your question is general in nature, as not all the facts are known to him. You should retain an attorney experienced in immigration law to review all the facts in your case in order to receive advice specific to your case. Mr. Shusterman's statement above does not create an attorney/client relationship.
CPT or OPT allows the employer to classify you as a W2 employee or a 1099 agent or contractor if consistent with IRS regulations. It should not affect the processing of an H1B petition filed by your employer. Consult with your current immigration attorney for case specific advice.
The information contained in this answer is provided for informational purposes only, and should not be construed as legal advice on any subject matter, nor should it be viewed as establishing an attorney client relationship of any kind.
Your employer needs to issue you a W-2 as a regular employee on payroll, NOT a 1099 as an"independent contractor" that you never were. Explain that to him.
Kindly be advised that the answer above is only general in nature cannot be construed as legal advice, given that not enough facts are known. It is your responsibility to retain a lawyer to analyze the facts specific to your particular situation in order to give you specific advice. Specific answers will require cognizance of all pertinent facts about your case. Any answers offered on Avvo are of a general nature only, and are not meant to create an attorney-client relationship.
Usually, employers misclassify individuals as independent contractors instead of employees. This is because it saves the employer time and expense (withholdings, etc.). If you can, try to contact your former employer to change this--this will require that you return some money to the employer, since the proper withholdings were never withheld. But I agree with colleagues that this in and of itself will not have an adverse consequence for an employment based visa.