A few years ago, I wrote a little piece on 1 John and sin. I don't think I have it uploaded anywhere, but in the past Chris Bounds used to use it in some of his theology classes, I believe. I've heard he is actually writing a book on sin for Wesleyan Publishing House.
1 John used to be a strange book to me. I always felt like there was something concrete hiding behind the incredibly vague, circular, general, and abstract comments that fill it. Rightly or wrongly, I have begun to fill in the "novel" that is reconstructing the meaning of a book like this one. Here is my section called, "Don't Sin," in the book I'm writing on Hebrews, the General Letters, and Revelation.
1 John’s comments on sin are not just the timeless musings of a theologian. There is a concreteness hiding behind them. We can now begin to fill in more concretely what John had in mind when he said things like, "If we claim to be without sin, we deceive ourselves and the truth is not in us" (1:8).
First, if the Docetists who left his community did not believe Jesus had come in the flesh, then they were nullifying his sacrificial death. They were eliminating the very mechanism whereby they could be forgiven. 1 John was likely written several decades after the temple was destroyed. We hear no trace in this letter of the temple as a means of atonement.
What may have been a somewhat new thought at the time of Hebrews was presumably well accepted by the time of 1 John. "If anybody does sin, we have an advocate with the Father—Jesus Christ, the Righteous One. He is the atoning sacrifice for our sins, and not only for ours but also for the sins of the whole world" (2:1-2).
But if someone did not believe that Jesus had come in the flesh (4:2), if someone did not believe that Jesus was even the Messiah (2:22), that person had no chance of forgiveness. Such a person has cut off the only means whereby their sins can be atoned.
Their denial may have been both theoretical and concrete. The concrete denial may have gone something like this: "We haven't wronged you. You are in the wrong." Obviously John did not agree. They had been hateful toward their brothers. They had wronged their brothers and sisters.
"All wrongdoing is sin" (5:17). Even more God's fundamental command is that we love one another and those who left violated this "law" on the highest level. "Everyone who sins breaks the law; in fact, sin is lawlessness" (3:4).
"No one who is born of God will continue to sin, because God’s seed remains in them; they cannot go on sinning, because they have been born of God" (3:9). This statement, ripped from its context as a memory verse, may miss John's concrete point. John's point is surely that we must eventually question whether those who concretely continue to live in a way that harms others, especially Christian brothers and sisters, is truly born of God.
We remember what James said about the person who looks at himself in the mirror and then forgets what he looks like (Jas. 1:23). God's word, his seed, is planted in you (Jas. 1:22). It should bear a certain kind of fruit (cf. Gal. 5:22-26). If it doesn't, there is something wrong, no matter what creeds we confess or prayers we have prayed.
On a theoretical level, to say that Jesus had not come in the flesh was to say you did not need his sacrifice. Perhaps the departed Gnostics did not consider the deeds of their bodies to be actions for which they were responsible. Perhaps they thought their spirits would be fine because they were not to blame for the things done with their bodies? Perhaps they said that they--the real them--had not sinned?
They certainly would have denied doing wrong to John's community. "We have not sinned." Are these the arguments that stand behind 1 John 1:8 and 1:10? "If we claim we have not sinned, we make him out to be a liar and his word is not in us" (1:10). The Greek perfect tense here suggests that John is speaking of someone who would deny ever having done wrong.
The perfect tense has the sense of something that is completed in the past, whose results have continued to the present. "I have been married sixteen years" means that I became married in a completed sense sixteen years ago and I remain married. So John speaks of someone who would say I have never, ever sinned such that I would ever need Christ to atone for my sins.
Once we have clarified what John is saying, we can understand 1 John 1:8. Many people read this verse to say that if we deny sinning all the time, we are deceiving ourselves. But this is not what John says. John is speaking of someone who denies "having" sin, such as the person in 1:10. He is saying the same thing. If we deny needing Christ's atonement, if we deny that we have ever sinned in the past such that we "have" sin from the past that needs Christ's cleansing, we are deceiving ourselves.
Again, John is not writing a theology textbook. He has the concrete situation of his community in mind. Those who left denied their need for Christ's atonement. They thought that Christ had only come "by water only" at his baptism. But Jesus had come "by water and blood" (5:6). Christ had not, as the early teacher Cerinthus had taught, just taken possession of Jesus' body at his baptism, only to leave before the crucifixion. 
We can thus reconcile 1 John 1:8 with 3:9. "If we claim to be without sin, we deceive ourselves," yet "No one who is born of God will continue to sin." The second quote speaks of the ongoing way a believer lives. The first has to do with someone who would deny even needing Christ's atonement.
The bottom line, however, is in 2:1: "I write this to you so that you will not sin," where John fundamentally defines sin in terms of not loving others in a very concrete way. It is also safe to say that John considers opposition to the truth about Christ as sin. "There is a sin that leads to death," John says (5:13). Presumably he believed that those who left had committed it. Like the fate about which Hebrews warned its audience, John probably does not hold out much hope for those who have left and turned away from Christ.
But there is still hope for others in the community. "There is sin that does not lead to death" (5:17). Like those mentioned in James 5:20 and Jude 1:23, there are those on a dangerous path who can still be saved. John writes in hope that those who have remained will move forward in confidence.
 See Irenaeus, Against Heretics, books I and III.