"Death Benefit from Long Term Disability Taxable?"--> It depedns on the situation.
“I received a 1099-R with Box7 Distribution code -4 from them with the amount I received in the other income box. I did not claim this since it was a death benefit distribution. I have now received a CP2000, stating I under reported. Is this taxable income?”--->Basically,the IRS notice CP 2000 shows proposed changes to your income tax return. This proposal is based on a comparison of the income reported on your tax return with information on these items reported to the IRS by the payer. The CP 2000 also reflects any corrections the IRS made to your original return when the IRS processed it. So to speak, the IRS CP 2000 tax notice informs you of the IRS's proposed changes to taxable income, tax payments, tax credits, or tax deductions, and the amount of tax due to the IRS, or tax refund due to you.The CP 2000 just asks you to verify the income( or credits, and deductions)reported on your tax return because they're different from the information the IRS received from other sources. The IRS may even be proposing a decrease to your tax. The CP 2000 is only a proposal that offers you an opportunity to disagree, partially agree, or agree with the proposed changes. The IRS haven't charged any additional tax at this time.If you do not agree with the correction the IRS made it is important that you respond to the IRS CP 2000 tax notice as requested by the IRS. You should write to the IRS and tell them why you disagree with the IRS CP 2000 tax notice so any necessary action can be taken. If you are due a tax refund as a result of a tax adjustment, it will be sent to you by the IRS unless you owe other amounts the law requires the IRS to collect from your tax refund (for example, related tax accounts, child support, student loans, etc.).
For more info. on IRS CP 2000, please visit the IRS Website here; CP 2000 Frequently Asked Questions (FAQs)