You are snowballing corners to get a square in a square blocks. This is what happens:

The black lines are for your 5" square, the blue lines for the finished block, 4 1/2". The red lines are for the snowballed corners. If you were using 2 1/2" like in the first drawing, once you sew the blocks together you lost the points, hidden in the seam allowance.
As other forum members said before, these corners must overlap: you must start with corner squares that measure half the side of your block, plus 1/2", like I represented in the second drawing. I hope this drawings have helped.