The default PayPal payment method has integration with the RMA add-on. In case you have changed the return status to Approved or Completed and confirmed the refund operation, the refund request will be made to the PayPal's side and in case everything went well, you will receive the following notification:
Notification was displayed? If not, there might have been some error returned from the PayPal’s side, so I recommend you to check the Administration > Logs for the latest requests to PayPal, containing the REFUNDTYPE text.
There should be present the log entry with request to PayPal (https://api.paypal.com:443/nvp) with RefundTransaction text within request body. Please find this entry for the date when you tried to change the return status and check the Response.
Please let me know if the response has any text about errors.