The only ways to issue a "refund" are to

A) Cancel an Entire Order & Refund it

B) Add Fee/ Discount

The only way to "return" an item is to remove it from the order.

There is also no way to issue any kind of return label option for the customer to send back the product.

It would be helpful if there was an option in the order manager to "return item" and have it faded out so we can still reference it later if needed.