Congrats on the backpay.
Sorry about the previous post. Wasn't clear on whether VA or SSDI.
You can separate SSDI back pay over the time frame if you want to. File amended returns for those years. Or, you can include the taxable portion in this years income, whichever results in the lower tax.
GO TO:
http://www.irs.gov/faqs/faq6.html
6.1 Social Security Income: Back Payments
I received social security benefits this year that were back pay for prior years. Do I refile my returns for prior years? Are the back benefits paid in this year for past years taxable for this year?
You must include the taxable part of a lump-sum (retroactive) payment of benefits received in the current year in your current year's income, even if the payment includes benefits for an earlier year.
Generally, you use your current year's income to figure the taxable part of the total benefits received in the current year. However, you may be able to figure the taxable part of a lump-sum payment for an earlier year separately, using your income for the earlier year. You can elect this method if it lowers the taxable portion of your benefits. Refer to Publication 915, Social Security and Equivalent Railroad Retirement Benefits, for a detailed explanation of the election and worksheets.
References:
Tax Topic 423, Social Security and Equivalent Railroad Retirement Benefits
Publication 915, Social Security and Equivalent Railroad Retirement Benefits