Add egg, sour cream, baking soda, nutmeg and vanilla and mix at medium speed until well combined.

Gradually beat in flour. This will be a very thick dough. If dough seems too thin and sticky, gradually add additional flour 1 tablespoon at a time and mix until combined and you have a nice thick dough (do not add more than 4 additional tablespoons of flour). Cover and chill overnight.

Preheat oven to 375 degrees F. Meanwhile, allow dough to come to room temperature for 15 minutes.

Flour work surface and rolling pin very well. In batches, roll chunks of dough (about 1 cup dough) to about 1/8-inch thickness (it is helpful to flatten dough with your hands into a disc before you start rolling it out).

Cut dough using your favorite cookie cutters.

In batches, as you finish rolling and cutting them, transfer cookies to unlined cookie sheets. Baking time is very dependent on exact oven temperature, cookie sheet you use, and size of cookie cutters. Transfer cookies to oven and bake cookies 6 to 12 minutes or until they just begin to become light golden brown around the edges (start checking them at 6 minutes until you know how long your oven will take). Cookies will be very soft when they come out of the oven. Carefully transfer to parchment paper and let cool completely before frosting.

Divide frosting into several bowls and stir in food coloring a few drops at a time until desired color is reached. If frosting is still too thick, stir in milk a few drops at a time until frosting reaches a thick spreadable consistency. Spread frosting over cookies and immediately sprinkle with sprinkles or sparkling sugar.