Are you using on-camera flash?
The trick is to rotate the flash up and away from your subject and let it bounce off walls and ceilings. Diffusers help, but aren't going to solve everything, particularly if you are relatively close to your subject... unless the diffuser is HUGE. Like 3'x3' kind of thing.
I'm not sure if you're seeing it- look at your picture. It is VERY hot. Every single thing in the shot is lit pretty much equally, and all of it is too bright. Your subjects foreheads have shiny spots on them, etc.