I was not sure where to put this. Please move if necessary Well, as you know I was injured in 2008, and was unable to work. I had been applying for INCAP pay but my Guard unit was a nightmare. I was approved for SSDI, and was also entitled to the INCAP. Needless to say, I was just paid in 2010 for the back pay to '08 and this has caused trouble. I now OWE the IRS because it put my husband and I in another tax bracket! I had been to social security and asked, and was told that I could get both as long as I had not worked. I even asked about having money withheld from the SSDI income and was told that it wasn't necessary because it is a type of disability pay. Oh were they wrong! So my advice would be to have them take out additional money for taxes for the time you are receiving INCAP so that you do not have any additional surprises. This is just a suggestion though, since it is disability pay, why can't incap pay be tax free or soldiers are given a tax break when they have those lump sum payments like that. Those monies had to get us out of debt, which was caused by a bum system, and we still end up paying in the end. Does anyone know of any tax breaks or any info that can assist with this new unexpected bill?