Open another canvas. It doesn't matter what size you make it, as long as it is the same size or bigger than the area you want it to cover on the image. Open a new canvas by going to "File" and clicking "New." Select your dimensions and click "Okay."
Draw your tattoo design on the new canvas. Use a second layer on top of the background layer. You can add a second layer to the canvas by going to the "Layer" menu, hovering over "New" and choosing "Layer." Draw your design onto this layer.
Un-check the background layer of your tattoo canvas. On the "Layers" window, both the layer you created and the background will have an eye in a little box to the left. Click on this eye beside where it says "Background." The eye should disappear and on your canvas, the background should appear gray and white checked. This indicates your background is now clear. This is essential if you don't want the tattoo to have a rectangle shape around it.
Select the entire tattoo canvas and copy it. Use the "Rectangular Marquee Tool" to draw a rectangle around the entire canvas, or at least around the entire tattoo. The "Rectangular Marquee Tool" appears as a dotted rectangle on the toolbar. Go to the "Edit" menu and click "Copy."
Paste the tattoo on the photograph. Click on the window that the photograph is in to make it active. Go to the "Edit" menu and click "Paste." Your tattoo image will appear on top of the photograph.
Place the tattoo where you want it on the photograph and resize it to fit. Drag the tattoo with the "Move Tool." The "Move Tool" appears as a four-way directional symbol beside a black arrow tip on the toolbar. Using the same tool, you can resize the object by moving the handles until you reach the desired size. Just move the small white squares that appear around the edges of the object to resize. Now your subject has a fake tattoo.