Preheat oven to 350 degrees F.

Prepare Peppermint Filling: set aside. Prepare Peppermint Topping; set aside.

In a mixing bowl, beat together butter and sugar until creamy; add vanilla extract. Stir in flour; knead until well mixed.

Set aside 1/2 cup of dough; shape remaining dough into 1-inch balls. Make a deep well in the center of each ball with the handle of a wooden spoon. Fill with 1/4 teaspoon prepared Peppermint Filling.

Use reserved dough to cover filling by placing a small flat disc of dough over the hole. Reshape if necessary into smooth balls.

Place on ungreased baking sheets, about 1-inch apart, and bake approximately 12 minutes or until set but not brown. Remove from oven, immediately remove from baking sheet, and roll warm (not hot) cookies in the prepared Peppermint Topping mixture. Set on wire racks to cool completely. Roll in any remaining Topping mixture again (if desired).

Makes about 32 to 48 cookies (depending on size).
 

Peppermint Filling:
2 tablespoons cream cheese, softened
1 tablespoon milk
1/2 cup powdered (confectioners) sugar
3 tablespoons finely crushed peppermint candy or candy canes
1 drop red food coloring (optional)

Tip for crushing hard peppermint candy: Place candy in a large plastic food-storage bag, and chill in the freezer. Crush candy inside of the bag by lightly pounding with the smooth side of a meat mallet or a small pot.

For the filling, combine cream cheese and milk in a small bowl. Stir in powdered sugar, crushed peppermint candy, and food coloring (if desired); mix well.


Peppermint Topping:
1/2 cup powdered (confectioners) sugar
6 tablespoons finely crushed peppermint candy or candy canes

In a small bowl, combine powdered sugar and crushed peppermint candy.