Yes, if you owe on your taxes, because the Recovery Rebate credit is a credit and not a refund, the IRS can take it. The stimulus payments that the IRS distributed by check were an advance payment on this credit. Since you had not yet filed your tax return, you got the payment. Unfortunately now that your tax return indicates that you owe on your taxes, the IRS uses that credit to offset the balance due.
The recovery rebate credit is a "refundable" credit, which means you'll get tax refund if the credit is larger than the tax that you would otherwise have to pay. ("Non-refundable" credits will only take your tax bill down to zero – they won't trigger a refund even if they're more than the amount you owe.)
Here is a TurboTax article about the difference between credits and refunds on a tax return.
The recovery rebate credit is a "refundable" credit, which means you'll get tax refund if the credit is larger than the tax that you would otherwise have to pay. ("Non-refundable" credits will only take your tax bill down to zero – they won't trigger a refund even if they're more than the amount you owe.)
@Looney1966
