Re-size image to be used so that the dimensions are powers of 2 (e.g. 512x512, 256x1024, etc.) Note: This isn't a requirement but it will take advantage of mipmaps which improve image quality when applied to the characters.
    Rename the image to the overlay name you'll use, e.g. blazingtattoo_60.png Note: Anything proceeding the underscore must be the same as the tattoo collection name.
    Export a tattoo from OpenIV (e.g. mp_bus_tat_m_006.ytd)
    Rename tattoo filename to overlay name mp_bus_tat_m_006.ytd -> blazingtattoo_60.ytd Note: Anything proceeding the underscore must be the same as the tattoo collection name.
    Open the tattoo .ytd in OpenIV texture editor and use the rename option to match the image filename, e.g. blazingtattoo_60
    While still in texture editor, use the replace option and select the image file with the same name (e.g. blazingtattoo_60.png).
    You should have now have 2 textures in the tattoo, delete the older one and save the .ytd
    Move the .ytd to resources[familyrp]\new_overlays\stream
    Open/Create an .xml similar to blazingtattoos_overalys.xml located in \resources[familyrp]\new_overlays This file dictates the tattoo gender, placement, and scale. Male tattoos will only work on males and vice versa. If you hear of someone saying the tattoo shows for them but not others, it is because they are using a tattoo opposite of their gender.

Follow previous examples located in blazingtattoos_overlays.xml Note: Anything proceeding _overlays must be the same as the tattoo collection name. The key components you need to edit:

    <Item>
-->      <uvPos x="0.720000" y="0.670000" />
-->      <scale x="0.280000" y="0.350000" />
      <rotation value="0.000000" />
-->      <nameHash>blazingtattoo_05_M</nameHash>
-->      <txdHash>blazingtattoo_05</txdHash>
-->      <txtHash>blazingtattoo_05</txtHash>
-->      <zone>ZONE_RIGHT_ARM</zone>
-->      <type>TYPE_TATTOO</type>
      <faction>FM</faction>
      <garment>All</garment>
-->      <gender>GENDER_MALE</gender>
      <award />
      <awardLevel />
    </Item>

If it is a female tattoo, it should be named blazingtattoo_05_F instead. If it is a badge or hairstyle, you need to change property to reflect that. Potential zones are: ZONE_HEAD ZONE_LEFT_ARM ZONE_LEFT_LEG ZONE_RIGHT_ARM ZONE_RIGHT_LEG ZONE_TORSO

    Open/Create shoptattoos.meta file and add an entry there for the overlay. These don't require much work.

The key components you need to edit:

    <Item>
        <id value="92610"/>
        <cost value="50"/>
-->     <textLabel>BLAZINGTATTOO_TAT_004</textLabel>
-->     <collection>blazingtattoo_overlays</collection>
-->     <preset>blazingtattoo_04_M</preset>
        <zone>PDZ_HEAD</zone>
        <eFacing>TATTOO_RIGHT</eFacing>
        <updateGroup>ARM_RIGHT_LOWER_SLEEVE</updateGroup>
        <eFaction>TATTOO_MP_FM</eFaction>
        <lockHash>CUSTOM_TATTOOS</lockHash>
    </Item>

Collection needs to be the same name as your XML file. None of the other information matters as far as I've been able to tell in tattoos.meta.

I find it easier to just load the tattoos in the game and edit their position/scale while live. You can use icecon or the console window to issue "restart new_overlays" and the tattoo will update.