Well, I see the problem. It's kind of a drag. No doubt what's important to you on this part is the outside dimension, and that's why you've got your flange position set that way - naturally. Apparently, the mitered flange tool ignores any corner relief setting you have, so if you are controlling the dimension from the outside of the flange, the material wants to crash into itself at the corner unless your gap is big enough so that no relief is needed. If you're controlling it from the inside, it lets you have tiny gaps, because no interference is caused. It may be that we're both missing some way of make it relief the affected corners (hopefully, someone else will reply to this if that's the case), but in the mean time, here's a somewhat ugly but effective work-around:
In the miter flange dialog box, choose the flange position option to control the dimension from the inside of the flange (the middle box). Then change The dimensions of your base flange, subtracting twice your material thickness (if your flange is on both sides of the part, as yours is). If you want, you can do this with equations so that if the material thickness changes in the future, the outside dimension of the part will stay the same. In your case, Brooke, those equations are as follows:
"D1@Sketch1" = 20.485-(2*"Thickness@Sheet-Metal1"

"D2@Sketch1"=12.917-(2*"Thickness@Sheet-Metal1"
I have updated the part you sent me as above and am sending it back to you.
Hope that helps. Charley Leonard
CSWP