You’re correct that the stimulus payments aren’t taxable income, and you're not seeing a software error that needs correction.
The stimulus money isn't being taxed -- your return is simply being adjusted to reflect what you've already received. It’s important to understand that the stimulus payments were actually advances on the Recovery Rebate Credit, which is claimed on your tax return.
When you begin entering your information into TurboTax, the program starts with the assumption that you haven't received stimulus payment, and are therefore entitled to the Recovery Rebate Credit on your return.
When you enter the amount of stimulus you've actually received, it adjusts your refund to account for that.
The IRS requires you to report all relevant stimulus information when you’re filing your return.
This is a poor way of doing the math. Everyone doing the program sees what they owe; then after inputting their stimulus checks the amount owed goes up exponentially. I firmly believe it should have been done the other way around. If you didn't get your stimulus checks, then you complete the computation for the rebate recovery amount - not vice versa.