You just keep waiting. The buyer technically only has 5-6 days to return the item after initiation. If it still only shows "Return Started" , after about a 5 weeks it will roll off and close automatically.
Any income is taxable and should be claimed on your taxes. You will receive a 1099 from Paypal if you break the 200 item/$20K barrier, but unfortunately that does not relieve you from keeping good records and reporting any income below that amount.