Combine flour, baking powder, baking soda, salt and nutmeg in a bowl.
In a separate bowl, combine butter and sugar until light and fluffy. Add eggs, vanilla extract and lemon extract, and beat until combined. Add milk and flour mixture alternately, mixing after each addition, until combined.
Divide dough into 2 disks, wrap in plastic wrap and chill at least 30 minutes, preferably overnight.
To bake, preheat oven to 350°F.
Roll one half of dough out on a well floured board or counter. For crisp cookies, roll to about ⅛ inch and for softer cookies, roll to about ¼ inch. Cut desired shapes with floured cookie cutter. Transfer to cookie sheet, leaving at least one inch between cookies.
Bake for 6-7 minutes, or until lightly browned on the bottom. Remove from cookie sheet and cool completely on wire rack.
Decorate as desired (see note).
If you prefer not to frost cookies, make them sparkle with sugar. Before baking, lightly brush the cookies with milk and sprinkle with your choice of colored sugar. White sugar is pretty, too.
The colder the dough, the easier it is to roll out. I usually divide the dough in half and leave half in the fridge while I cut out the other half.
Yield depends on the size of the cookie cutters you choose. Nutrition is calculated on a yield of 5 dozen, 2 cookies per serving.