Earnings are generally paid first only if the periodic payments are [Edit] not in the form of an immediate annuity after annuitizing, but there are a few exceptions to this rule. Based on what the annuity company told you, apparently the annuity company believes that the payments that you are receiving are not periodic payments from an immediate annuity but are instead non-periodic payments from the deferred annuity that just happen to be equal amounts distributed on a regular basis. As such, distributions are fully taxable until all earnings have been distributed.
Still, I'm not sure how you could be receiving lifetime GMWB benefits without annuitizing. Simply arranging a distribution schedule where a specified amount is paid at regular intervals would not necessarily mean that you annuitized the deferred annuity and may be resulting in the recalculation and lowering of your GMWB. You need to sort this out with the annuity company.
If the annuity has been annuitized but the annuity company did not know the amount of your investment in the contract, they should have left box 2a blank and marked box 2b Taxable amount not determined, in which case you would need to calculate the taxable amount using the General Rule. However, the fact that they put a taxable amount in box 2a indicates suggests that it would be inappropriate to use any other amount as the taxable amount. Specifying a different taxable amount would likely result in a letter from the IRS indicating an underreporting of income.
