The amount of any federal income tax withholding must be based on marital status and withholding allowances. However, An employee may claim exemption from federal income tax withholding because he or she had no income tax liability last year and expects none this year but they are still subject to social security and Medicare taxes. A W-4 claiming exemption from withholding is valid for only 1 calendar year. To continue to be exempt from withholding in the next year, an employee must give you a new Form W-4 by February 15 of that year. If the employee does not provide a new Form W-4, then you would withhold tax as if the employee is single with zero withholding allowances or withhold based on the last valid Form W-4 you have for the employee.
I’d check with an attorney before contacting the IRS to report excessive withholding allowances.