To issue a refund for a donation, you would need to go to the record of the payment you wish to refund. If the payment type is a credit card, you will find a "Refund" button on top of the payment details page.
If the payment type if not a credit card, you would then go to the transaction and add a new payment with a record type of refund. This will allow you to then specify the refund amount. Once saved, you will notice a record of the original payment and record of the refund within the payment related list of the transaction.
Out of curiosity, will that automatically update the transaction amount and the allocation amount? Or will that need to be done manually?
Great question! When refunding credit card payments, it will automatically create a payment record with a record type of refund and will update the transaction approved amount to reflect the refund. However, it does not create an allocation for the refund payment record so you will have to do this manually.
When refunding payments where the payment type is not a credit card, it will also automatically create a payment record with a record type of refund and will update the transaction approved amount to reflect the refund. It also creates an allocation for the refund payment record so you will not have to do this manually. Just a reminder to set the payment amount with a negative value when you are entering the refund.
I will bring this to the attention of our development team and see if we can have refunded credit card payments update allocations automatically as well.