Does the Tax Relief Credit come out of my refund? The IRS subtracted $1,200 from my refund and no one notified me. Is this an error?

Yes, recovery rebate credit is added as refund on your 2020 federal income tax return.   If your refund was reduced, you may receive a letter of explanation from the IRS. As of March 18, 2021, the 2020 Recovery Rebate Credit amount will no longer be applied to past due federal income tax debts. Generally, tax refunds are applied to tax you owe on your return or your outstanding federal income tax liability. If you are eligible for a 2020 Recovery Rebate Credit, and your return reflects a tax refund –  the refund amount associated with the 2020 Recovery Rebate Credit will not be applied to a federal income tax liability.