I just realized that I have been hired as an Independent contractor(1 week in). Though I am on my CPT period, I know it messes up my F1 status. I want to know how it will effect the follows if I continue.
1. Tax returns
2. Future attempt to get an h1

Working as an independent contractor while on a F-1 visa IS a technical violation of the visa, but it is NOT your violation; it is a violation on the part of the employer.

However, NO ONE CARES!

The IRS does not care because the income taxes collected are the same. You will have to file Schedule C with Form 1040NR, but the tax rate remains the same, since NO self-employment taxes are due from a F visa holder.

The USCIS theoretically should care, but they have limited manpower and resources, and this violation HURTS NO ONE and actually may result in you pay slightly less in taxes because you can deduct some of your work expenses on the Schedule C, resulting in a LOWER net tax due.

Finally, it will have NO adverse effect on your H-1B application, because the USCIS knows you had no part in the decision-making process as to how you would employed while on OPT.