Basically the area shown by the tool and the actually effected area is offset by about 5 pixels. I didn't really notice this till I started trying out pixel art and it is very frustrating. If I inch the tool up off of the work area it will go about 5 pixels or so out of bounds then my mouse will show up down and to the right of were the tool cursor was.
Please read this (in particular the section titled "Supply pertinent information for quicker answers"):
Does turning off »Use Graphics Processor« in the Performance Preferences (Photoshop > Preferences > Performance > Graphic Processor Settings) and restarting Photoshop have any bearing on the issue?
Is the issue noticeable with the Rulers visible and hidden?
Could some OS-sided plugin be interfering with the cursor?
Thank you for responding, I did what you suggested and turning off all the options for Windows Ink actually fixed it for the pencil. and now the eraser only does it when I have it set to "Pencil Mode"... not sure why it fixed one but not the other. I can work with this for the short term though.