Paraphrase
5 God is pure, 6 and those who say they are His must be pure as well. 7-10 Tests are offered to judge our own purity.
Key Verse
1:8 - This sums up the situation nicely. To deny our sinfulness is to deceive ourselves, and to show by proof that truth (which is in Christ and is Christ) is not in us.
New Thoughts
There are two sets of parallels here. The first group shows the ways in which this test is failed:
1:6 - if we say we have fellowship with God but walk in darkness then we lie and don't practice truth
1:8 - if we say we have no sin then we deceive ourselves and truth isn't in us.
1:10 - if we say we have not sinned then we claim God lied and His Word isn't in us.
From the parallels, we can conclude that to deny our sinful state is sinful in itself. For it denies not only the truth of our own condition, but denies the truthfulness of God's Word. Not a good place to be in.
In contrast, we have to parallels of the test passer:
1:7 - if we walk as He walks, then we have fellowship and are cleansed from all sin by Christ Jesus.
1:9 - if we confess our sins, then He forgives us our sins and we are cleansed from all unrighteousness.
The first of these directly addresses the first failure. The walk and the fellowship must match. To walk otherwise would be to have fellowship with the devil. The second brings us to the place claimed by the failures, only by admitting our natural state, can we attain to the stature of "one whose way of thinking, feeling, and acting is wholly conformed to the will of God". This is only going to come to us by God's grace through Christ's work.