Oh Duckie, bless your heart.
I have been a psych nurse for 12 years, and believe me, that doesn't make me immune to mood disturbance or anxiety. So I want to address your post from a professional as well as a personal perspective.
First of all, hang in there - many tx options are available, and with some trial and error perhaps, you will find one that works for you.
First, let me suggest therapy. Talking to someone, who can be totally objective, can be an awesome relief as far as dealing with stressors. And all the pills in the world won't change other people or your situation. What therapy may change, is the way you deal with stress.
Regarding medication - any SSRI i.e. Paxil can be effective for anxiety and depression, but of all the SSRIs, in my experience I have found that it seems to have the most side effects, including a syndrome of sorts that could be compared to withdrawal when you try to discontinue it. I believe the 'jury is still out' on that so I wouldn't suggest it as a first line of treatment for depression/anxiety.
Now I will share personal experience regarding Paxil. I have been on it for more than 3 years. The reason I went on it, was because of feeling extremely stressed, irritable, just kind of miserable. What it has done for me is to level my mood, make my outlook much brighter, I can deal with stress much more effectively, and I'm generally a more positive and outgoing person. I feel much more competent in my work - as all that CRAP can start to affect one's self esteem as well. In looking back at my family history, it has become quite evident that at least my maternal grandmother and my mother have both experienced anxiety and depression, so I say I came by it honest, as it is fact that there is a genetic component to emotional/mental disorders. And not to mention HORMONES which I feel played a big part in my stuff.
The down side for me with Paxil was that I gained 40# within probably the first year of taking it. Any SSRI (or other antidepressant for that matter) can affect the part of the brain that deals with appetite satiety, I guess because loss of appetite is usually one of the target sx when treating depression. I managed to lose about 30#, but geez I still love to eat. Also, I have tried to stop Paxil a couple of times and hated the way that made me feel, so I decided - hey, stay on it, if it ain't broke, don't fix it. I figure I am a much more likeable person ON it, LOL.
If you have smoking issues (which by the way, may not be the optimal time to deal with, at least until you're feeling better), Wellbutrin is often used for those with sx like you describe, that may want to address the smoking as well.
I suggest only SHORT TERM use of the Xanax - yes it's good for the immediate anxiety/panic feelings. but really has only a bandaid effect, won't be good in the long run, especially for the mood stuff - and is quite addictive.
Duckie, see your doctor or a mental health professional ASAP. There is help and hope. Please keep us informed on how you're doing. Hang in there and God bless you Duckie.