Things get worse for Tim in your typical over-the-top Fawlty Towers style comedy style. His girlfriend leaves him when Barry stops her outside the apartment, thinking she is Darla the stalker, and tells her that he is sleeping with someone else and what they had was a mistake.
Tim breaks into Kieran's apartment with Barry, but doesn't find Julie. Instead he hears that Kieran is planning to make his move now that she is available.
Knowing that Julie will be joining Kieran at his ranch for the weekend, they go to Barry's IRS office to look over his accounts and find the address of the secret rendezvous, when they meet Barry's nemesis and boss - Therman (Zach Galifianakis, the funny one from The Hangover) - who has the power to control Barry with his mind. They don't find the address - and in fact only manage to get Tim audited. Outside the office we find out that Therman is sleeping with Barry's ex-wife.
Soon enough it's the lunch date with the Muellers (David Walliams - is this his first big screen role?). Tim tells Mueller and his wife that Julie couldn't make it because of an injury - until Barry turns up with Darla, pretending to be Julie. Somehow there is talk of marriage, and everyone persuades Tim (who always carries around the ring) to propose to Darla - who accepts, just as Julie walks into the restaurant - and then walks out of his life.
Barry feels responsible, and as they sit in the Porsche while Darla goes mental on the paintjob, he swallows his pride and asks for the address from Therman.
At the Ranch Tim apologises to Julie, but Barry overhears the plan about the party and that Tim thinks he is an idiot. Tim leaves alone.
But things are ok as he receives a call later from Mueller, who understands about the lunch date because they have a similar Dinner for Schmucks thing in Switzerland - and that his guest is killing them at the party - Barry has made it to Fender's Dinner party. Tim joins his friend, where they must compete against a ventriloquist married to his puppet, a woman who can communicate with dead animals, a Beard champion and a Blind Fencer (the guy from the 'IT Crowd', who steals the best line in the movie - and in fact any movie I have seen in a long time --- Fencer: "I love to paint", Exec: "Really? Are you any good?", Quick reply: "I don't know").
Barry impresses the crowd with his mice dioramas - until Tim's rival introduces ... Therman!
Therman starts to control Barry with his mind. After a quick pep-talk, Tim convinces Barry that he has the power of 'brain control', which beats 'mind control' any day. Barry uses his new power on Therman and wins the contest.
Tim feels guilty and announces to 'the schmucks' that the execs are just using them, and that they are the real idiots, yadda yadda. The blind Fencer goes crazy, and while attempting to stab people slices off Mueller's finger and starts a huge fire. Tim and Barry need to escape through the window.
Back at Tim's place, Tim goes on about how losing Julie was the worst thing to happen to him - little knowing that Julie is standing behind him. She takes him back, and Barry convinces Kieran to leave. Both now out of work, their only comfort is each other - and Barry.
So, through Mice Dioramas and cutaway scenes we're soon told that Tim and Julie managed to open a modern art museum for the Muellers, Kieran and Barry joined forces to develop their own unique style of art, Barry got together with Darla, Therman wrote a self help book that was only popular in the insane asylum where he was held, Barry organizes a breakfast club for his new "schmuck" friends, and Tim and Julie finally married and honey-mooned in Paris - with Barry hiding under the bed.
After the credits we're told that Fender's company went bust, and he was described by Forbes as the biggest loser of all. That's nice.