Preheat oven to 350 degrees F. Line parchment paper on a cookie sheet and set aside.
In a large mixing bowl with a hand mixer or in a stand mixer with a paddle attachment, cream together the butter and sugar until light and fluffy.
Add the egg yolks, eggnog, and vanilla and continuing beating until creamy.
In a separate bowl, stir together the flour, baking powder, nutmeg, cinnamon, and salt.
Add to the butter/sugar mixture, a little at a time, and beat until well combined.
Using a cookie scoop or tablespoon, form the dough into small balls and place a few inches apart on the cookie sheet.
Bake for 10 to 12 minutes. Transfer to a rack to cool.
In a large mixing bowl with a hand mixer or in a stand mixer with a paddle attachment, whip the cream cheese until light and fluffy.
Add in the butter and cream together until fluffy.
Beat in vanilla, 1/8 cup of the eggnog, ¾ cups of the powdered sugar, nutmeg and cinnamon and mix until blended and smooth.
Slowly add in the remaining eggnog and powdered sugar until blended.
Frost cooled cookies and sprinkle nutmeg over the frosting if desired.