How do I write off a credit balance for a customer?

First of all a word of warning.  I am not sure where you are located, but most states in the US have what are called Escheat Laws that technically say you can't write off customer over payments without some real reason to do so and after so long if the customer does not use it then you need to remit it to the state.  You can Google Escheat or Escheatment Laws for your state to learn about the requirement.

With that said, people often do write of balance for many legitimate reasons.  I would have a non-inventory item set up that goes to the correct income account you want it to go to.  For example, misc income or something like that.  Invoice the customer for that item setting the amount to the amount of the credit you want to write off.  Go to receive payment from customer, select that invoice you just set up and then apply the credit to net the two against each other.

Hope that helps.