"...the right to declare all takings were supposed to be payroll, and that allows them to assess interest and late fees/penalties, because this is considered an attempt to avoid paying taxes, which is not legal."

Wow.  Avoiding taxes is the only reason they are doing this.

I'm using email to document my conversations in case the *hit goes down.  Maybe time for me to call AON Insurance for advice.  Re-read Circ 230 too.