My wife and I bought an annuity from our savings in 2005 for $100k. We sold it in January 2021 for $172k. Brighthouse withheld $8700 in Fed Tax. But the 1099-R we received shows the $100k original investment in box 5 (Employee Contributions/Designated Roth contributions or insurance premiums). The original $100k was none of those. It appears we're being taxed on the $100k, when we obviously had already paid tax on that amount when we made the investment. Currently we own $5k in Fed Tax and when I removed this form we're owed a $3k refund. How can I adjust this in TurboTax? Thanks.
I'm not sure you need to adjust anything in TurboTax. The taxable amount of your distribution would be the amount in box 1 of your form 1099-R, less the amount in box 5, assuming you withdrew all of the money in the annuity. The tax that they withheld is entered on your tax return as a subtraction from your tax on the distribution.
To summarize, the amount of your distribution less the $100,000 that you contributed is taxed and that tax shows on your tax return. Then, the amount they withheld ($8,700) is also listed on the tax return and is subtracted from your tax. So, you are not being taxed on the $100,000.