Which tax-related behavior leads to a 25% penalty?

The 25% penalty is associated with the failure to provide requested information to the IRS. When taxpayers do not respond to inquiries about their tax return, or if they fail to supply documentation that supports the claims made on their tax filings, the IRS can impose this penalty as a way to encourage compliance and ensure that accurate information is reported. This penalty is significant because it reflects the seriousness of not cooperating with tax authorities, which can hinder their ability to effectively verify and process tax returns.

In contrast, late filing of tax returns generally incurs its own penalties, which can vary based on the number of days the return is late. Similarly, underreporting income typically attracts a different penalty related to the amount of tax due as a result of the underreported income, and claiming ineligible deductions can also lead to penalties, but these are not standardized to a fixed percentage like the penalty for failing to provide requested information. Thus, the unique circumstance of not supplying requested information justifies the specific 25% penalty in this context.