IRS Publication 505 discusses the penalty for filling out form W-4 incorrectly:
You may have to pay a penalty of $500 if both of the following apply.
You make statements or claim withholding allowances on your Form W-4 that reduce the amount of tax withheld.
You have no reasonable basis for those statements or allowances at the time you prepare your Form W-4.
There is also a criminal penalty for willfully supplying false or fraudulent information on your Form W-4 or for willfully failing to supply information that would increase the amount withheld. The penalty upon conviction can be either a fine of up to $1,000 or imprisonment for up to 1 year, or both.
These penalties will apply if you deliberately and knowingly falsify your Form W-4 in an attempt to reduce or eliminate the proper withholding of taxes. A simple error or an honest mistake will not result in one of these penalties. For example, a person who has tried to figure the number of withholding allowances correctly, but claims seven when the proper number is six, will not be charged a Form W-4 penalty. However, see chapter 4 for information on the penalty for underpaying your tax.
Of course, the question then becomes: What is considered a "reasonable basis" for the number of allowances that you claim? The text goes on to say that the penalty will only be assessed if you "deliberately and knowingly falsify your Form W-4 in an attempt to reduce or eliminate the proper withholding of taxes." In my very limited experience, the IRS doesn't care how many allowances you claim as long as the amount of tax you are having withheld is ultimately correct. In my situation, I claim many more allowances than the worksheets tell me I should. Because of my deductions, I end up with a refund every year regardless, meaning that I am still having more tax withheld than I owe, despite the high number of allowances claimed.
However, if you do claim a high number of allowances on your W-4, and then end up with a high tax bill on your tax return, that is another story. Be careful.