Thank you for the help on this matter. I have exactly the same scenario. No open invoices for the cust but they sent payment anyway. Checks were deposited into our biz account and now I need to refund cust. 

When I follow the steps above, it deducts the amount from the customer showing they owe us money. So, obviously I am missing a sequence of steps to do before the refund process. Do I simply Receive Payment in the customer profile and then issue the refund?