This is totally badass.

Magento doesn’t natively support the resizing of category images. Sad Face.

No need to worry though, as Magento Resize Category Images saves the day.

Upload the files to your app/ folder and then you can either:

Resize the image into a square format.

<img src="<?php echo $this->helper('timage')->init($_category->getImageUrl())->resize(120, 120) ?>

Or crop it to your own dimensions.

<img src="<?php 
    echo $this->helper('timage')
              ->init($_category->getImageUrl())
              ->setWidth(230)
              ->setHeight(200)
              ->crop()
              ->resize() 
    ?>" alt="alt text"/>

Simple.