The number of allowances on W4 is set by an employee - please pay attention it calls number of allowances and not number of dependents.
The employee may have other reasons for increasing this value. For instance, itemize deductions, education credits etc. - http://www.irs.gov/pub/irs-pdf/fw4.pdf
See more details in IRS publication 505 - http://www.irs.gov/pub/irs-pdf/p505.pdf
See also IRS publication 15 page 14 - http://www.irs.gov/pub/irs-pdf/p15.pdf
In the past you have to submit to IRS all W4s. Now you would submit it only per IRS request.
You should calculate the withholding based on the signed W4 form. If you feel that W4 filled incorrectly - give a written letter to employee and have it signed for acknowledging before accepting W4. You still have to follow W4. The employee will be responsible for penalties if withholding would turned to be incorrect.
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