In a large bowl, combine softened cream cheese and butter; beat with an electric mixer until smooth and creamy. Blend in 1/2 cup of confectioners’ sugar into the butter mixture. Gradually add and mix in the flour until well combined. Cover the bowl and refrigerate for at least 3 hours or overnight.
Preheat the oven to 375 degrees F (190 degrees C).
On a well-floured board, roll out the chilled dough to 1/8 inch thickness. Use a pizza wheel to cut the dough into 2 1/2 inch squares. Spoon approximately 2 teaspoons of filling in the center of each square, being careful not to overfill. Fold the opposite corners of each square into the middle to encase the dough, pinching the dough together in the center. Allow the filling to peek out slightly at each end. Transfer the filled cookies to an ungreased baking sheet.
Bake the kolacky in the preheated oven until set but not browned, approximately 12 minutes. Remove the cookies from the oven and transfer them to racks to cool. Once cooled, dust the kolacky with the remaining powdered sugar. Enjoy!
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