Unemployment compensation is not subject to self-employment tax. The recovery grant is probably what is causing the problem.
TurboTax put the grant on Schedule 1 line 8z because you entered the 1099-G under "Other 1099-G Income." What the IRS is probably saying is that, since the grant is for your business, it should have been included in the business income on Schedule C. That would give you a profit from the business and would generate Schedule SE to calculate self-employment tax on the business profit.
Read the entire IRS notice carefully, and follow the instructions in the notice for how to respond. If you need to revise your tax return to create Schedule SE, since you are using the CD/Download TurboTax software, first save a copy of your filed tax return with a different name. Make any changes to the new copy, so that you don't change the original return that you filed, and you can get back to it if necessary. To move the grant income to Schedule C, delete the 1099-G that you entered. Then enter the grant as other business income that was not reported on a 1099-NEC or 1099-MISC.
