An intelligent method of handling incremental backups concurrent with load balancing movement. The file system uses placement tags, incremental backup requests and capacity balancing data movement to make intelligent decision to avoid affecting any backup windows for clients or backup apps. The file system tracks capacity balancing file movements inside the cluster. When switching locations of files in a cluster from one node to another, it is performed as an atomic change of switching inode attributes by the file system after the contents of the file have been copied over to the new node. During the file movement for capacity balancing, the file system handles requests for full backups differently than requests for incremental backups. The file system continues to handle virtual systhesis and fastcopy requests on the node that hosts the previous backup to ensure that the incremental backup succeeds with the expected smaller backup window from the client.