there is an agreement in place with the IRS for the film and video industry. You should read this link http://www.mca-i.org/en/art/?9
so you understand who is and isn't an independent contractor.
The simplest way to have avoided all the issues is to use a payroll service that will be the employer of record. Now I would throw yourself on the mercy of a good accountant and perhaps Volunteer Lawyers for the Arts if they can hook you up with a good tax attorney.
These threatening letters from the IRS or State department of Revenue agencies are often designed to throw the fear of god into you. In all probability, the situation is much less dire. Consult a good accountant.