Preheat oven to 350°F (180°C). Set aside bagged sprinkles or sugars in Soft Sugar Cookie Gift Jar. Transfer remaining contents jar into large bowl. Add butter, egg and 1 tsp (5 mL) vanilla. Using an electric mixer on medium speed, beat until well-combined dough forms.
Transfer dough to lightly floured surface and roll to about 1/4-in. (5-mm) thickness. Use a variety of 2-in. (5-cm) holiday cookie cutters to cut into cookies. Arrange cut-outs about 1-in. (2.5-cm) apart, on parchment paper-lined baking sheets. Re-roll scraps twice to make a total of about 2 dozen cookies.
Bake, in batches, on middle rack, 10 to 12 min. until lightly golden around edges. Cool on baking sheet 1 min. Transfer to wire rack to cool completely.
To make icing, whisk icing sugar with 2 tbsp (30 mL) water and remaining 1 tsp (5 mL) vanilla until smooth. Transfer to small, re-sealable plastic bag. Snip off small corner and pipe icing onto cookies. Top with sprinkles and let stand 15 min. until icing is set.
For a more complete gift, place the icing sugar in a decorative jar and attach to Soft Sugar Cookie Gift Jar with tape or ribbon.