As Kiki, Frank, Sam, and Betty Ann start the fire, Tucker comes in riding on Gary's back. After being questioned, Tucker reveals that he blackmailed Gary into being his servant for a week after finding an embarrassing poem Gary wrote. He then tells Gary to tell his story, as he has to wash his socks when they get home. Gary introduces the point of his story before titling it The Tale of the Crimson Clown.
Mike Carter is attempting to buy a gift for his mother's birthday. He takes his bratty younger brother Sam out to the store, telling his mom they are going ice skating. They arrive at a store, and Sam goes to the toy shop next door. After deciding to buy his mom a porcelain statue with $70 he had brought with him, Mike opens his wallet to find his money gone. Sam comes back and accidentally reveals a video game, which he had bought by stealing Mike's money. In a fit of anger, Mike motions to a clown doll on a shelf, telling Sam it is the Crimson Clown in its dormant form, and that it comes to terrorize bad kids like him into being good.
Mike and Sam arrive home with their mom furious at their being late. Sam gets Mike in trouble by saying he deliberately made them tardy and then goes up to his room to hide the game. After having a short conversation with his mom, Mike turns around to see the clown doll sitting on his desk. Mike comes in only to find the doll gone. Sam goes down to the table, unaware that the doll is hiding under his bed.
After dinner, Sam goes to watch TV, but is interrupted when the power goes out and the Crimson Clown's arm reaches out of the TV towards Sam. The Clown disappears when Mike enters the room. But when Sam goes upstairs to get ready for bed, he finds his room trashed and the doll sitting in the clutter. The Clown disappears shortly after.
Later, Mike comes into Sam's room and tells him there is no Crimson Clown. Sam falls asleep and wakes up to find himself in a warehouse full of stuff from the store. Sam tries to escape but finds himself trapped, shortly before being cornered by the real Crimson Clown. The Clown wraps Sam in ribbons shortly before Sam wakes up. He sits up, thinking it is only a dream, before realizing he is tied down to the bed with the Crimson Clown's ribbons. Sam escapes and tries to wake u Mike, only to find the Clown in Mike's place. The Clown taunts Sam, telling him that no one wants him and that he has nowhere to hide. Sam tries to escape through the window, only to be confronted by the Clown. The Clown attempts to drag him off, but Sam cuts himself free with an ice skate. The Clown then corners Sam again, as Sam apologizes for all the bad things he has done and begs for another chance.
Sam wakes up to find that the Clown has altered time so that he didn't steal the money and Mike bought Mom's present. The story ends with Gary saying "that every kid deserves a second chance-and the Crimson Clown gave Sam his."
At the end of the story, Tucker gives the poem back to Gary, only for Gary to throw it into the fire, as Frank asks out Sam. Sam dumps the bucket of water on his head, telling him "It's a real hot offer, I think you need to cool off a bit." She then acceots Gary's offer to walk her home. As the credits begin, we see that the poem was for Sam before the fire consumes it.