Is that disability settlement from social security? or from your employer? other?
There is no taxes on social security benefits (including disability benefits) if your other taxable income plus half of social security benefits is less than $25,000 (assuming you are single).
So if you do not have any other taxable income - your social security disability benefits are not taxable.
Please consider this example - your other taxable income in 2009 is $10,000
so - $10,000 + $22,000/2 = $10,000 + $11,000 = $21,000 - that i s less than $25,000 - and none of your social security disability benefits are taxable.
Let me know if you need any help.
In this case if you file jointly - the limit for married filing jointly is $32,000 - in your situation - 85% of your social security disability benefits are taxable.
You will report that income on the form 1040 - http://www.irs.gov/pub/irs-pdf/f1040.pdf
line 20a - $22,000
line 20b - $18,700 - that is your taxable amount which is 85% of $22,000.
If the amount you received is for some past years - the determination of taxability should be based on income from those years - but if you have same income level - there will not be any difference.
You may try to file as married filing separate - in this case only 50% of your benefits will be taxable - $11,000 and you will owe smaller tax amount, but your husband tax liability will be higher - so you would need to compare before making a decision about filing status.
Please provide the information above to your tax preparer for considerations.
Let me know if you need help in estimations.