Might this be Aliens Ate My Homework (1993) by Bruce Coville...?
This review contains a good summary of the plot, confirming the interaction between a schoolboy and tiny aliens in a miniature spaceship:
Sixth-grader Rod Albright, better known as Rod the Clod among his classmates, is a target for the two bullies at school and the go-to babysitter for his toddler twin brother and sister at home. One day, while working on a science project for school, a miniature alien spaceship crashes into his window, and Rod is commandeered into helping the alien crew in their search for BKR, an intergalactic criminal infamous for his cruelty – and who just happens to be hiding out in Rod’s neighborhood. Can Rod, who is incapable of lying, keep his alien visitors a secret and help them succeed in their mission while getting his science project done on time?
And having checked a preview of the book, I can confirm that the alien does state that it would prefer to be referred to as "it" rather than "he" or "she":
I turned to Madame Pong, but she just spread out her hands. "I don't think you want to get into a discussion of biology as it is practiced on Tar Gibbons's planet."
"Okay," I said. "Just tell me what pronoun to use when I'm talking about him. Her. Uh, it. I mean ... see what I mean?"
"It will do just fine," said Tar Gibbons.
"What will do just fine?"
"It will," he repeated.
"It. Refer to me as an it."
"That seems pretty rude," I said nervously.
"Not as rude as calling me a he or a she," it said.
Searching the preview also brings up results for a "shrinking ray" and a "rocket belt".
The book was subsequently adapted into a movie. Here's a trailer, introduced by William Shatner: