3 year old frusrated and using bad language

My 3 year old son will say "you are so stupid, you are the worst mother" when he is frustrated with a no answer. He will also flail his arms, not necessarily hitting, but not in control. He sometime will make his entire body go limp. We do not use the word stupid in our house, but he has learned it. He will be 4 in November. Can you please walk me though how to best handle this? I know it's a habit right now. Right now, I will remove him from whatever he is doing to calm down and we will do corrections together.