I'm having the same issue
I followed the intructions and tried it on the app and everywhere else but all I get is
(Check the instructions that came with your code. You might need to redeem it on a different web page.)
This code ONLY works if you have NEVER had this service before. So if you already signed up for the service at $1 for the first month, then the code would not work for that xbox account. I know this because that is what I did... i contacted microsoft, and they canceled my game pass subscription, and then the code worked. I am not sure if it would work for you guys this way as it was canceled the same day I signed up.
Another option would be to create a new xbox account.
TLDR - This worked for me, even after having used the 1 month promo offer and not having to create a new account.
I got Xbox support to call me using their portal, give any reason as you'll have to explain to the rep about this issue anyways. The first rep I spoke to got in touch with their senior techs and they weren't being helpful. They explained that this promo can't be applied to my Xbox account since I had already used the 1 month offer and didn't really offer any suggestions around this. I even had to suggest that I could just create a new account and apply the promo to that as a workaround. I ended the call and the following day called them back again. This time around the rep was not aware of the offer but handled the call as explained above in the previous post. My Xbox account has now been credited with 3 months subscription.