Use the original corner (the piece under the small square) as your guide as you press that top piece open. Line up the edges and don't worry about opening the seam all the way. Use the original corner as your pressing guide. THEN you can cut the excess fabric off under the top piece, once you have the seam pressed.
Now, if your small square's edges don't reach all the way to the original corner, you will have to sew the seam again, leaving a tad more seam allowance. Then pick the first stitching out.
One good hint when sewing these is to sew just barely to the inside of the line you drew... one thread's worth. That much fabric gets used up by the 'turning', when you press that top piece open.
Hope that was a little clearer than mud!