If it's at the start of a sentence you won't know. If it's in the middle of the sentence you'll know since the "Sie" will be written in upper case for the polite form of you but it will be written in lower case for "they"

In "you are happy", how can you tell if it is singular "you" or plural "you"? Without context, you can't. With context, you tell it from the context. The same goes for "sie", with the exception that in written German, the polite form is always capitalized, so in the case you can tell.

in any case thank you for answering!!

you can say to your child: "I see you are happy now" it is not about the happy issue it is about using "Sie sind" in differnt meanings

How many times have you told someone "you are happy"? I know I can't remember ever having said that to someone, particulary not in a formal situation