We are a small C corp with sales less then 4 million I have 2 questions

1. Are we able to use the "CASH" method for accounting for our corporate taxes

2. It has been advised to us to begin to set up a retained earnings account and deposit 5% of sales to this account for emergencys and small oppurtuities for future expansion.

Will we have to pay corporate taxes on this account or does the IRS allow us to keep a certain amount in the bank

We have not paid any dividends to date

Bob