They're both correct contractions. One of them might feel awkward in a sentence depending on use, but they are more or less equal in formality and correctness. Both of these contractions are used commonly even in formal speech- like a business meeting, court of law, or a news broadcast- so the version without contraction "It is not" will sound either very formal or be used for emphasis. I would not use "it is not" in translation unless a character was vehemently disputing something or if I wanted to give a sense of a different time (formal historical speaking). Even an upset person is very likely to say "No, it's not!" Or "No it isn't!" rather than "It is not!"