You cannot issue refunds in Ivy, however you have many options to take care of this in Ivy - 

Option 1: Delete the item from the invoice - this will then lower the balance of the invoice, therefore, creating a credit of the overpayment. This credit can then be applied to any other invoice in the project. This credit amount will show up in the Credit/Retainer tab within the project.
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Option 2: If you want to keep a record of this item on the original invoice - instead of deleting the line item, you can change the value of the item to $0, and change the description of the item to include "REFUNDED" so your client sees a record of this. This, too, will reduce the total balance of the invoice, therefore creating a credit to be used elsewhere in the project.
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Option 3: If you want to leave the item details as is - you can simply add an additional line item of the same product again - you can add in "REFUND" to the line item title. For the cost of the item, you'd enter in the NEGATIVE amount equal to the item's cost - essentially, you are canceling out the line item value. Again, therefore, reducing the value of the total invoice, and the overpayment would be turned into credit able to be applied elsewhere in your project.