Family is singular so ....is small. Families is plural in which case it would be Your families are small (speaking to more than one person).
It marked "your family isn't small" as wrong, giving the correct solution as "Your family is not small". Normally I wouldn't mention this in the Discussion, but when I tried to Report it, I don't get the usual "My answer should be accepted" option...
Well, such contractions are accepted automatically, so it definitely should have worked... must've been a bug :/