We're very close to launching our app and we want to test the dispute/refund process. We've made several successful test payments however we're hesitant to dispute them. Will our app get flagged? What is the best way to test the dispute/refund process?
Testing Disputes and Refunds in Facebook Payments
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While you cannot test the flow end to end, you can test the integration with your backend by manually executing a POST request to /PAYMENT_ID/refunds with an app access token and the amount to be refunded (could be total or partial). There is no need to start a dispute through FB to be able to refund it from your app.
If a dispute justifies a refund, you can award one using the transactions's ID and making a post to the /PAYMENT_ID/refunds with an ~app access token~ and the amount to be refunded [...] The dispute status will automatically be set to resolved with the refunded_in_cash reason.
A payment doesn't necessarily have to be disputed by the consumer for you to be able to refund it. If a user contacts you directly, you can issue a refund for the payment as long as the refundable_amount is greater than the amount you're trying to refund. This functionality is also helpful when you are testing your app.
Source: https://developers.facebook.com/docs/games_payments/fulfillment/disputes
They've listed all the documents for it here: https://developers.facebook.com/docs/howtos/payments/disputesrefunds/
I'm sure if you put in the dispute reason "This is a test for the developer: please ignore" or something or contacted Facebook and asked them they'd find a way. There is though, at present, no public method of testing dispute handling.