If the inquiry came through a paying site such as homeaway or vrbo, report it to the administrators of the site.
Otherwise I do not believe there is anyone or anywhere to report these online scams; there are so very many coming from all directions that they don't receive much attention.
You could contact local law enforcement and ask if they have any recommendations for reporting the individual.
I woud advise ending communication with this individual. If you feel you must respond, simply tell them the rental will not work out. If you wish to return the "payment" return whatever form of payment you receive to the mailing address from which it originated. But, if it's the usual overpayment scheme, I would throw it in the trash and not waste your money on the postage.
If you have any reason to believe the individual is legitimate and simply made a mistake, you should request payment of the the appropriate amount and see what happens.
It doesn't sound promising based on what you have written.