The film kicks off with Willie Soke (Billy Bob Thornton) struggling as a valet driver at a country club. His attention is distracted by a woman breastfeeding her baby, leading to a catastrophic crash that sends him careening into a stand. This reckless act results in his immediate termination after a heated dispute with his bosses.
In a voice-over, Willie reflects on the tumultuous years since the events of the first Bad Santa. Contrary to expectations, he survived his encounter with the police, made a full recovery after his prison stint, and believed he had found happiness with Sue. Sadly, his self-destructive behavior ultimately chased her away. Desperate and despondent, he attempts to end his life by placing his head in the oven. When that fails, he resorts to hanging, only to be interrupted by the now 21-year-old Thurman Merman (Brett Kelly). Thurman is as clueless as ever, having given up his belief in Santa but still tailing Willie. He now works at a sandwich shop, pursuing his passion for food. As Willie dangles precariously from the ceiling, Thurman innocently suggests that his age means he thinks Willie will "pop his cherry," to which Willie dryly corrects him.
In an unexpected twist, Marcus (Tony Cox), Willie's former accomplice, reappears fresh from prison, minting plans for a $2 million heist in Chicago. While Willie is reluctant due to their past—the attempted murder during a previous job—Marcus insists he has changed.
Upon their arrival in Chicago, Willie discovers that Marcus’s scheme entails robbing a charitable organization called Giving Way. Compounding his distress is the revelation that his despicable mother, Sunny (Kathy Bates), is involved with the charity and cruelly taunts Willie with derogatory nicknames. After a violent encounter where Willie snaps and punches her, he storms off, adamantly refusing to work alongside her again.
Later, a tense meeting in Sunny's apartment forces Willie to reconsider his stance, especially after Marcus persuades him to agree to the heist—with a stipulation that they will sever ties with Sunny afterward. To maintain appearances, Willie begrudgingly dons the Santa costume to collect donations. However, an altercation with a rival Santa leads to his arrest, while Marcus attempts to infiltrate the charity by getting close to the manager's assistant, Diane (Christina Hendricks), who struggles with her past alcoholism.
After being released, Willie and Diane share an intimate encounter behind a dumpster, unaware they are being watched by security. Meanwhile, Marcus's attempts to charm a security guard, Gina (played by Jenny Zigrino), for access to the safe fall flat due to his height disadvantage.
Despite their chaotic undertakings and growing conflicts, Willie begins to bond with his mother, even stealing medications for her severe cough. This strained relationship takes a dark turn when Sunny pressures Willie to further manipulate Gina for access to the charity's safe.
Willie’s life complicates even more when Thurman, having been smitten by Willie's side of the world, travels from Arizona to find him. Out of guilt, Willie ultimately resorts to dropping Thurman at a shelter but is soon reminded of their unconventional bond when Thurman sings joyfully in a Santa suit at the charity event.
As the heist approaches, chaos ensues. Just as Willie and Marcus prepare for the robbery, they are confronted with a shocking revelation—Marcus's intentions were never loyal, leading to a violent showdown where Sunny betrays everyone involved, showcasing the utter moral decay of their plans.
In a frantic final sequence, bullets fly and alliances shatter. When the dust settles, Willie finds himself recuperating in the hospital, with an unexpected "happy ending" involving Diane. His clever maneuvering tips the scales in his favor, as he manages to avoid jail time while watching over his new surrogate family.
By the end, Willie embraces a new way of life, working as a hospital janitor alongside his bizarre but beloved family, drawn together through tragedy and a shared love of chaos. In a moment of dark humor, he contemplates revenge on Marcus, resulting in a vengeance-filled, Instagram-worthy moment of teabagging his former partner, encapsulating the absurdity and heartbreak of his misadventures.
