STEPHEN BALDWIN was arrested in New York yesterday for TAX EVASION.  He allegedly owes the state more than $350,000.  And they don't think it was a simple oversight.  They claim he never even filed a return in 2008, 2009 or 2010.

The D.A. says, "At a time when Rockland County and New York State face severe fiscal shortfalls, we cannot afford to allow wealthy residents to break the law by cheating on their taxes."

This is a felony, and Stephen could face up to four years in prison for it.  But he pleaded not guilty, and his lawyer says he did nothing wrong.  (Here's his mugshot.) 

 (People)