IANATL, but I believe that it is legal. You can lie all you want to on that form; it's just there so that you get the correct amount held out of your paycheck for income taxes. Where a penalty comes into play is that if you owe a lot of taxes come tax day, they may charge you interest for not having sent in in all throughout the year. I've been in that situation once; one of the options is "let the IRS figure out how much interest you owe and bill you". They never billed me. Of course, I was only very slightly over the limit.

I wouldn't take my word for it, though. Or at least I wouldn't if I were inclined to sue me if I was wrong.